Tesla did not give a clear forecast for vehicle deliveries in 2021, and although CEO Elon Musk said demand for the company’s electric vehicles is higher than ever before, without more figures going on, investors remained shrugging.
Tesla Inc. generated record profit in the first quarter, sidestepped an industry chip shortage, increased manufacturing, and even made Bitcoin money.
And yet the EV maker’s shares dropped as much as 4.3 percent in early trading Tuesday, an indication of Tesla’s lofty hopes now contend after last year’s eightfold stock rise. Among the analyst quibbles: in 2021, Tesla offered no clear forecast for vehicle deliveries.
Chief Executive Elon Musk is pushing to boost production and retain Tesla’s supremacy in the electric vehicle industry, but rivals are moving aggressively. Musk said Monday demand is higher than ever, but investors shrugged without more numbers.
“It’s all well, just not much news and it wasn’t a blowout,” Loup Ventures’ Gene Munster said. “Everything happened that people thought would happen.”
Tesla Bitcoin boosting
Tesla pulled a new trigger to quarterly juice profits, raising $101 million in revenue from selling around 10% of its Bitcoin assets.
Profit from the cryptocurrency and the selling of regulatory credits and tax benefits contributed about 25 cents to Tesla’s 93 cents a share adjusted earnings, enabling the carmaker to beat Wall Street’s 80-cent average forecast, Dan Levy, a Credit Suisse analyst, wrote in a note Monday.
Tesla Chief Financial Officer Zachary Kirkhorn said Bitcoin values, Tesla, as a way to store cash while maintaining liquidity, particularly with traditional investment yields so low.
“We believe in Bitcoin’s long-term value,” he said at a conference call. “Our intention is to keep what we have long-term and continue to collect Bitcoin from our customers’ purchases when they buy vehicles.”
Tesla revealed its initial Bitcoin purchase earlier this year, saying it would consider it as a form of payment. The sudden announcement helped improve crypto’s reputation, spurring a rally.
Chip shortage
Tesla’s results kick off a year in which the California-based Palo Alto automaker will expand operations on three continents, including completing new factories in Austin, Texas, and near Berlin. Tesla reiterated that deliveries “over a multi-year horizon” expect 50% annual growth. That’s about 750,000 cars delivered this year.
The unchanged guidance dropped several analysts and investors who hoped for more detail after a first-quarter blowout.
“Investors probably came off the 1Q earnings call discouraged,” Jeffrey Osborne, a stock market performance analyst at Cowen & Co., wrote in a research note on Tuesday, citing “the absence of near-term catalysts.”
At 10:11 a.m. in New York, shares dropped 3.8% to $710.38.
Tesla handed over nearly 185,000 cars worldwide in this year’s first three months, facing a shortage of semiconductor supplies. It delivered nearly half a million cars in 2020.
Tesla and other automakers have had to deal with strained stocks of chips and other components, an unwelcome headache that comes when they scale up production to meet higher market demand in the pandemic. Consultant AlixPartners said this year’s chip shortage could cost automakers $61bn in lost revenue.
“This is a big issue,” Musk said. “Q1 had one of the toughest supply chain problems we’d ever had.”
The CEO said he expects shortages in the second and third quarters to continue impacting the business.
Growing EV Pie
The EV leader faces a new wave of competition from many new models introduced by startups including Amazon.com Inc.-backed Rivian Automotive Inc. and existing automakers like General Motors Co. and Volkswagen AG this year.
In its quarterly release, Tesla sought to convince investors by noting rising demand for EVs and its own efforts to rapidly expand production capacity. “As more OEMs enter our mission by launching EVs, we believe consumer trust in EVs is growing and more consumers are willing to make the switch,” he said in a statement.
In the first quarter, Tesla’s revenue rose 74 percent to $10.39 billion, just short of analysts’ average estimate of $10.41 billion. Regulatory credit sales soared to $518 million, up from $401 million in 2020’s last three months.
The company has routinely taken in more money selling such credits to other automakers than it receives from its main car making and selling business. That’s a potential problem for Tesla as existing carmakers start offering their own EV lineups—they might not need to purchase as many credits in the future despite tightening global carbon emission standards.
Tesla said car building is getting better and more effective. Its automotive gross margin of 26.5% was above the 24.2% Bloomberg consensus. The company attributed the boost to cost-cutting lower average selling prices.
Fatal crash issues
The carmaker disputed questions about a fatal crash involving a Model S in Texas earlier this month, arguing that at the time someone was in the driver’s seat. The counter initial police statement that “no one” was driving, leading to speculation that Autopilot, Tesla’s name for their driver-assistance device, was a potential factor in the crash.
“We found the steering wheel was also deformed, contributing to the possibility that someone was in the driver’s seat at the time of the accident,” said Lars Moravy, Tesla’s vice president of vehicle engineering, on the company’s earnings call.
The crash near Houston left two men dead, and National Highway Traffic Safety Administration and National Transportation Safety Board prompted investigations. The company warned it couldn’t recover all the data from the vehicle and said it was cooperating with federal authorities in their investigations.
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