Tesla Inc (NASDAQ:TSLA) reported record revenues for the fifth quarter in a row but said as the new Gigafactories in Berlin and Texas prepare to start building their first cars, the final three months of the year could go a number of ways.
The electric vehicle company led by billionaire Elon Musk said supply chain issues were a heavy challenge, with none of its factories able to operate at full capacity amid semiconductor shortages, congestion at ports and rolling power blackouts.
“It’s important to note while we have roughly doubled deliveries year to date, this has been exceptionally difficult to achieve,” said finance chief or ‘master of coin’ Zachary Kirkhorn.
Production in the fourth quarter of the year will “depend heavily on availability of parts”, Kirkhorn said, adding that pricing of raw materials was creating an "uncertain environment with respect to cost structure".
Nevertheless, he said Tesla was “quite a bit ahead” of its ongoing target of growing deliveries by 50% per year, which he said remained the long-term goal.
For the third quarter, Tesla reported revenue of US$13.8bn, ahead of the average Wall Street estimate of US$13.7bn, as automotive sales rose 58% to US$12.1bn on vehicle deliveries that were up 73% to 241,391.
The average revenue per vehicle fell, reflecting a change in the mix from higher-priced Model S/Xs to lower-priced Model 3/Ys, as well as a 30% reduction in automotive credits.
But operating profits leapt 148% to US$2.0bn, slightly less than the market had forecast, though Tesla earnings per share of US$1.86 were better than the US$1.62 predicted.
Tesla set aside US$51mln as a bitcoin-related impairment and US$190m for a likely share-based payment to Musk, though the man himself did not appear on the conference call with analysts and investors.
Capital expenditure in the quarter was $1.8bn, up 81% year-on-year, as the group continues to invest in new factories as well as ramping up production in Shanghai.
Free cash in the quarter came in at $1.3bn versus $1.4bn a year ago and the bank balance finished the period at a net $16.1bn.
Executives said on the call that the development of the Cybertruck and planned $25,000 car are also progressing, with an estimated 2023 release for the latter still on the cards.
Analyst Nicholas Hyett at Hargreaves Lansdown said it was a very impressive set of numbers, despite external headwinds dragon on production.
“But the extra scale has still given Tesla the raw materials to deliver a step change in profitability. Crucially that profitability now looks far more sustainable. Genuine and substantial free cash flow gives the group the firepower it needs to deliver on its ambitious expansion plans for the next few years.
“Unfortunately despite all that progress, and what looks like an increasingly bright future, we still struggle with the group’s valuation. A price to earnings ratio of 122 times earnings is off the chart even for a capital light software business. And Tesla is anything but capital light. Depreciation has stepped up 30% year-on-year, and that’s only going to increase as factories age, meanwhile Tesla’s competition is finally getting its act together on electrification. We cannot fault the group’s progress, but whether that justifies a $856bn price tag is another question.”
Broker Wedbush was more bullish: “Taking a step back, with the chip shortage a major overhang on the auto space and logistical issues globally, these delivery numbers combined with this 'impressive earnings beat' speaks to an EV demand trajectory that looks quite robust for Tesla heading into 4Q and 2022."