Categories

News

Date

2024-05-30

Tesla Regains Lost Market Value After Robotaxi Cuts, Q1 Earnings Win

After a rather uneventful Robotaxi Day, Tesla has finally delivered a fairly decent third-quarter financial report.

The biggest highlight is profitability, with a net profit of $2.17 billion in the third quarter, a year-over-year increase of 17%; operating profit of $2.72 billion, a year-over-year increase of 54%; and a gross margin improvement of 1.9 percentage points year-over-year, reaching 19.8%. These figures all exceeded the expectations of Wall Street analysts.

In comparison, the total revenue for the third quarter was $25.18 billion, which, although an 8% increase year-over-year, was slightly below the market expectation of $25.5 billion and a sequential decrease of 1.2%.

In addition to financial data, during the earnings call, Musk and Tesla executives also announced progress in some important business areas.

Among them, the most attention-grabbing is the affordable car. Tesla stated that it will launch a cheaper model in the first half of next year, with a price tag below $30,000.

Additionally, the autonomous taxi Cybercab is expected to achieve mass production by 2026, with a target of producing at least 2 million units per year.

At the same time, Musk also envisioned a sustainable future from aspects such as humanoid robots and energy storage business.

Advertisement

Next, it depends on whether the promises Musk has made can be realized.

After four quarters of sluggish performance, profitability exceeded expectations.

On the early morning of October 24th, Tesla released its financial report for the third quarter of 2024. Influenced by the positive financial results, its stock price soared by more than 12% after hours, despite a decline during trading.Financial reports indicate that Tesla's total revenue for the third quarter was $25.18 billion, a year-over-year increase of 8%.

Looking at the composition of revenue, automotive revenue still accounts for the lion's share, amounting to $20.02 billion, a year-over-year increase of 2%, which is below the market expectation of $20.5 billion. Additionally, this includes $740 million in regulatory credits revenue, an increase of $185 million year-over-year, marking the second-highest in Tesla's history, just behind the $890 million in the second quarter of this year.

This is similar to the revenue Chinese car companies earn from selling new energy vehicle credits and can be understood as Tesla profiting from "selling carbon" to other traditional automakers. This part of the revenue also contributes significantly to Tesla's increased profits.

Excluding "carbon selling" revenue and automotive leasing revenue, Tesla's actual automotive sales revenue for the third quarter was only $18.83 billion, below the market expectation of $19.5 billion.

Tesla's two other businesses maintained growth. Revenue from energy production and storage was $2.38 billion, a year-over-year increase of 52%; service and other revenue was $2.79 billion, a year-over-year increase of 29%, mainly due to the continuous expansion of the Supercharging network in North America and its coverage of non-Tesla users.

Furthermore, the reasons for revenue growth also include the increase in confirmed revenue from FSD (Full Self-Driving feature) software year-over-year, primarily because Tesla pushed FSD to Cybertruck and introduced new features on FSD (such as Actually Smart Summon, a true intelligent summon feature).

Although the revenue did not meet expectations, the increase in gross margin allowed Tesla's profitability to greatly exceed market expectations.

In the third quarter, Tesla achieved a net profit attributable to shareholders (GAAP) of $2.17 billion; gross margin of 19.8%, with analysts expecting 16.8%; operating profit of $2.72 billion, significantly exceeding analysts' expectations of $1.96 billion; earnings per share (non-GAAP) of $0.72, a year-over-year increase of 9%, with analysts expecting $0.60.

For the better-than-expected profit figures, Tesla stated that the main reason was the reduction of the cost of goods sold (COGS) per vehicle in the third quarter to the lowest level in history, at approximately $35,100, a decrease of about $2,000 compared to the third quarter of last year.

The reduction in sales costs may be mainly due to Tesla renegotiating raw material procurement contracts, which led to a decrease in the cost of raw materials such as batteries, ultimately reflected in Tesla's costs.In terms of expenses, Tesla's R&D costs and sales and administrative expenses both decreased year-over-year in the third quarter, with reductions of 10.5% and 5.3%, respectively. This should be related to the decrease in personnel compensation due to layoffs in the second quarter.

Other key financial data for Tesla in the third quarter includes: operating cash flow of $6.255 billion, an 89% increase year-over-year; free cash flow of $2.74 billion, a 223% increase year-over-year; and cash, cash equivalents, and investments at the end of the third quarter were $33.648 billion, an increase of $2.93 billion quarter-over-quarter.

Overall, due to Tesla's efforts in cost reduction, as well as the recognition of more FSD revenue, more credit income, and strict control over R&D and sales expenses, Tesla made a significant profit in the third quarter.

However, some analysts have warned that after four consecutive quarters of missing earnings expectations, investors' expectations for the third quarter financial report are very low. The sustainability of Tesla's profitability in the third quarter is also a matter that needs to be followed up.

Affordable models coming next year

At present, the sales volume of Tesla's models on sale still maintain a growth trend. In the third quarter, Tesla's total vehicle production was 469,796, a 9% increase year-over-year; the total vehicle delivery volume was 462,890, a 6% increase year-over-year.

Specifically, the delivery volume of Model 3/Y was 439,975, a 5% increase year-over-year; other models delivered 22,915, a 43% increase year-over-year.

It is worth mentioning that the production of Cybertruck increased quarter-over-quarter and achieved a positive gross margin for the first time this quarter. At the same time, Cybertruck has become the third best-selling pure electric vehicle in the United States, second only to its peers Model 3 and Model Y.

Regarding future expectations, in the financial report conference call, Musk said that Tesla's vehicle delivery volume will increase slightly this year, and the delivery volume will increase by 20% to 30% next year.

Regarding new models, Tesla confirmed in the financial report that it will start producing a series of new vehicles, including more affordable new models, as planned from the first half of 2025. Musk said that the price of the new affordable electric car will be below $30,000.

Share This Post:-
Add a Comments:-