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What to Expect from Tesla’s First Quarter Earnings?

tesla

The first quarter earnings season is in a full swing and Tesla would report its quarterly report on Monday after the close of markets. What are analysts expecting from Tesla’s first quarter earnings report?

Tesla had missed earnings estimates in the fourth quarter of 2020. Prior to that, the company posted better than expected earnings in all the quarters since the third quarter of 2019. More importantly, all these quarters were profitable for the Elon Musk-run company.

Tesla first quarter earnings estimates

Analysts polled by TIKR expect Tesla to post revenues of $10.4 billion in the first quarter—a year over year rise of 73%. However, the company’s revenues are expected to be slightly below the record $10.7 billion that it reported in the fourth quarter of 2020. The company delivered 184,800 electric cars in the first quarter of 2021 which was a new record despite the first quarter being seasonally weak for the company.

The record deliveries should ideally have led to higher revenues for the company. However, in the first quarter of 2021, Tesla’s sales mix was skewed towards the lower-priced Model 3/Y which is expected to lead to lower revenues despite higher deliveries.

Tesla delivered a record number of vehicles in the first quarter

Tesla produced 180,338 cars in the first quarter and all of these were the Model 3/Y. The company did not produce even a single Model S/X in the quarter. As for deliveries, it delivered only 2,020 Model S/X in the quarter while the remaining 182,780 were Model 3/Y.

In the first quarter, Tesla started delivering China-made Model Y to customers. It began the deliveries of China-made Model 3 towards the end of 2019 and ramped up the deliveries last year. “We are encouraged by the strong reception of the Model Y in China and are quickly progressing to full production capacity,” said the company in its release.

As for Model S/X, the company is revamping the models. “The new Model S and Model X have also been exceptionally well received, with the new equipment installed and tested in Q1 and we are in the early stages of ramping production,” it said in the release.

Tesla is expected to post another profitable quarter

Analysts expect Tesla to post an EPS of $0.76 in the quarter. This would mean a seventh consecutive quarter when the company would post a profit. During their third quarter 2019 earnings call, Tesla had talked about being sustainably profitable in the future and so far the company has been able to post profits despite headwinds from the COVID-19 pandemic.

Tesla also earned a place in the S&P 500 Index last year as it posted profits for four consecutive quarters and fulfilled a key requirement to get included in the world’s most popular index. The company was the biggest ever to join the index.

Mizuho is bullish

Earlier this week, Mizuho hiked the target price on Tesla from $775 to $820. “With a strong start to the year, we see upside to the TSLA 831K consensus deliveries given proposed Biden infrastructure package with $100B in EV rebates and potential extension and expansion of EV credits,” said Mizuho analysts in their note.

They added, “TSLA regulatory credit sales and Bitcoin could be NT tailwinds, offset by near-term product/mix headwinds – through Long-term production ramps and process improvements.”

What to watch in Tesla’s earnings call?

During Tesla’s first quarter earnings call, markets would watch for commentary on the 2021 delivery guidance. During their fourth quarter 2020 earnings call, it said that it expects its deliveries to rise at a CAGR of 50% over the long term and expects the growth rate in 2021 to be “materially higher” even as the company did not provide hard guidance for 2021. It added, “As we increase production rates, volumes will skew toward the second half of the year, and ramp inefficiencies will be a part of this year’s story and are necessary to achieve our long-term goals,” the company said in its release.

Tesla car crash

Now, the company might provide quantitative guidance for its 2021 deliveries. Also, it would face questions about the recent crash of a Tesla car in Texas which is believed to have been on the Autopilot even as the company has denied the reports.

Harris County Precinct 4 Constable Mark Herman said that “no one was driving the vehicle at the time of impact.” He however added, “It’s still under investigation.”

On its part, Tesla claims that its autonomous driving is not fully autonomous yet and advises users to keep their hands on steering all the time. Tesla has gradually increased the price for its FSD (full self-driving) to $10,000 and Musk sees the price rising to $100,000 eventually.

Autopilot

In the past also, Tesla cars have been involved in fatal accidents while being on Autopilot. The National Transportation Safety Board has been critical of Tesla’s Autopilot in the past. Musk is often at loggerheads with authorities, and calls the SEC “short seller enrichment corporation.” Musk tweeted a report recently that the probability of a Tesla car with Autopilot being involved in an accident is much lower than an average vehicle.

Electric vehicle stocks

Meanwhile, there has been a sell-off in all electric vehicle stocks amid increasing competition from legacy automakers. Tesla meanwhile has recouped some of its recent losses and is down only about 17% from its 52-week highs. In comparison, most other electric vehicle stocks are trading at a big discount to their 52-week high prices. This includes Churchill Capital IV that is set to merge with Lucid Motors which is led by a former Tesla executive.

How to invest in green energy stocks?

You can invest in green energy stocks through any of the reputed online stockbrokers. Alternatively, if you wish to trade derivatives, we also have reviewed a list of derivative brokers you can consider.

An alternative approach to investing in the green energy ecosystem could be to invest in ETFs that invest in green energy companies like Tesla.

Through a green energy ETF, you can diversify your risks across many companies instead of just investing in a few companies. While this may mean that you might miss out on “home runs” you would also not end up owning the worst-performing stocks in your portfolio.

By investing in an ETF, one gets returns that are linked to the underlying index after accounting for the fees and other transaction costs. There is also a guide on how to trade in ETFs.

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Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.