Tesla (TSLA) shares have been under pressure heavy selling during the recent punishment of tech stocks. TSLA is down more than 10% in the past week and is off more than 23% from its 52-week high. Can its shares rebound?
The luxury electric vehicle maker is set to report fourth quarter fiscal 2021 earnings results after the closing bell Wednesday. There were questions heading into the new year about how Tesla stock would perform after the shares languished in the past two months amid Elon Musk’s planned stock sales. While the stock has, so far, stumbled, it would be hard to bet agains Tesla’s long-term success, especially given the the company’s latest blowout quarter for deliveries. It was termed a 'trophy case' quarter for Musk & Co. with massive momentum moving into 2022, according to Wedbush analyst Daniel Ives.
The fact that the company delivered 308,600 vehicles in the fourth quarter is nothing to sneeze at. Not only did that crush consensus analyst forecasts by 40,000 more vehicles, it also surpassed the most optimistic targets. For the full year, Tesla delivered 936,172 vehicles, almost doubling the its total for 2020. Now that both Giga Berlin and Giga Texas are due to start ramping up production this year, it’s easy to expect Tesla to strongly outperform its revenue totals again in 2022. Some delivery estimates call for Tesla to reach 1.42 million in 2022.
While the average Street price target is just under $900, I expect the Q4 delivery totals to compel price target increases in the weeks ahead. With the company already beating Q4 production and delivery targets handily, it’s a pretty good bet that both a top- and bottom-line beat is in the cards. Assuming Tesla exceeds analyst delivery forecast by mid double-digit percentage points for all of 2022, the stock should reach $1500 to $1800 by year’s end. But Tesla on Wednesday will have to say all of the right things to reverse the stock’s current decline.
In the three months that ended December, Wall Street expects the Austin, Texas-based company to earn $2.26 per share on revenue of $16.2 billion. This compares to the year-ago quarter when Tesla’s earnings came to 80 cents per share on revenue of $10.74 billion. For the full year, earnings are expected to rise 185% year over year $6.39 per share, while full-year revenue of $42.44 billion would rise 66.3% year over year.
Without question, Tesla’s increased focus on its growth strategy, namely production and profit margins, have been a major factor in the company’s recent success. And the expected 185% rise in full-year profits underscores Tesla’s level of execution and efficiency. Tesla in Q3 surpassed expectations on both the top and bottom lines. Q3 adjusted EPS of $1.86 topped estimates by 25 cents, revenue of $13.76 billion surged 57% year over year, and $60 million ahead of expectations.
Just as impressive, driven by production capacity run rate of more than 90% compared to each of the prior four quarters, this was the company’s ninth consecutive quarter of profitability. Automotive gross margin was also strong, coming in at 30.5%, more than two percentage points higher than consensus of 28.4%. The results weren’t a total surprise given the company’s strong production and delivery totals which came in a few weeks prior to the quarter. And that will be also the case this for the just-ended quarter.
We know Tesla’s Q4 numbers are going to be strong. The question is, what will the production and delivery forecast be, along with financial guidance for the first quarter and full year 2022? There are also rumors that the Cybertruck might be delayed until 2023. These are the topics that will likely drive the stock on Wednesday.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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