Editor's Note: Tesla will release its 2022Q1 earnings report next Wednesday, and although profitability may still be strong, there are some red flags in Tesla's stock price trend.
Author: Simon
The three major U.S. stock indexes fell overnight, with the Nasdaq falling nearly 300 points and the overall downturn in technology stocks. Twitter (TWTR.US) closed down slightly 1.68%, but the stock surged nearly 20% at one point before market hours. According to the U.S. Securities and Exchange Commission documents on April 14, Tesla CEO Musk proposed to buy all of Twitter's issued common shares in cash at $54.20 per share, for an overall consideration of $43 billion.
According to the Bloomberg list of billionaires, Musk remains the world's richest man with a net worth of $251 billion, while Twitter's current market capitalization is less than $40 billion.
Source: Bloomberg
Musk's wealth still stems largely from Tesla stock, which has rebounded rapidly to more than $1,000 in the past month at a position of $700, and its market value is still as high as $1,018 billion after the close of trading on April 14. Still, Wall Street moguls continue to be bullish on Tesla's future performance, and Gary Black, managing partner at Future Fund LLC, has shouted out the earth-shattering target of $4 trillion in market capitalization. This means that with Tesla's total share capital unchanged, the stock price will continue to double in the future.
At 5:30 p.m. Eastern Time on April 20 (the morning of April 21, Beijing time), Tesla will release its first quarter 2022 financial report. In the context of market turmoil and difficulties in the same industry, Tesla's stock price is so strong, can it be verified by performance?
First, the delivery volume is strong, and the growth rate is stronger than that of the industry as a whole
Judging from the delivery volume that is already a clear brand, Tesla is still the hegemon of the electric vehicle industry. According to the data released in Q1 2022, Tesla has produced 305,000 vehicles, an increase of 69.4% year-on-year; the cumulative delivery of 310,000 vehicles, an increase of 67.7% year-on-year, and set a record for record highs and quarterly deliveries.
Source: Public Data, Huaxi Securities
From the perspective of the two largest electric vehicle markets in China and the United States, the domestic Model 3/Y has reached 19,000 and 24,000 units respectively in January and February 2022 Chinese mainland insurance data, an increase of 18.7% and 34.1% year-on-year. Overall sales in Q1 2022 are expected to exceed 65,000 units, significantly higher than that of new power car companies in the same period.
The U.S. market also reflects Tesla's strength. According to Truecar.Inc's calculations, in the sluggish US 2022Q1 retail car market, Tesla's sales increased by 83.3% year-on-year to 127,000 units, which was significantly better than the overall automotive industry performance. The sales of traditional car companies such as Ford, General Motors, Volkswagen, Toyota Honda, etc. all fell by more than 20% year-on-year, reflecting the accelerated replacement trend of new energy vehicles for traditional vehicles in the US market.
Despite the recent severe epidemic in Shanghai and the repeated delays in the resumption of work at Tesla's Shanghai factory, its Q1 production has exceeded 300,000 units, delivering 310,000 vehicles, an increase of nearly 70%. Therefore, in the case of stable growth of existing capacity, the impact of Q2 will not be very large.
Second, or 11 consecutive quarters of profitability
Tesla's revenue reached $17.719 billion in Q4 2021, up 65% year-over-year and up 29% sequentially. Net profit under the GAAP guidelines reached $2.321 billion, the best performance ever achieved. Benefiting from the volume of Model Y and the reduction of local production costs, Tesla's profitability quality has improved significantly, and the net profit margin in Q4 of 2021 reached 13.1%.
Source: Company Announcement, Soochow Securities
However, due to the continuous price increase in the supply chain, Tesla may continue to face rising costs in 2022Q1. In 2021Q4, Tesla's bicycle cost rose by 2.6% month-on-month to $34,600, and this situation has not been significantly resolved by 2022Q1.
As a result, Tesla began raising the price of its models in March, raising prices three times a week. Among them, the Model 3/Y high-performance and long-endurance version has raised the domestic starting price by more than 20,000 yuan, while the domestic starting price of the standard version has also increased by 15,000 yuan. At the same time, the starting price of model 3/Y in the US market will also rise by 2-3 thousand US dollars, and the starting price of Model S/X will be raised by 5,000 to 12,000 US dollars.
Source: Tesla China
However, since the price adjustment only began in mid-to-late March, the potential positive impact of the price increase on profitability may be delayed. Since the delivery volume of 2022Q1 is only slightly higher than that of 2021Q4, the net profit performance of 2022Q1 is unlikely to increase significantly. But this does not prevent Tesla from achieving 11 consecutive quarters of profitability, because its high and relatively stable gross profit margin may be able to maintain. In 2021, Tesla's bicycle gross profit margin reached 28.9%, an increase of 4.12% year-on-year, making Tesla's bicycle gross profit rise to $14,000, a new high since 2019.
Source: Company Announcement, Soochow Securities
According to the consensus forecast of Bloomberg analysts, Tesla's adjusted net profit in 2022Q1 will likely reach $2.59 billion, with a year-on-year increase of more than 145%.
Source: Bloomberg
Third, Tesla's stock price is already at risk?
Although Tesla's stock price is still near historical highs, there have been some obvious "headwinds" in the recent past.
First of all, it is still the high level of inflation, making the Fed likely to start the 50 basis point interest rate hike process at the next meeting, and tightening monetary policy will be more urgent and rapid. This has also made the stock prices of growth technology companies soften significantly in the recent past, and Tesla is also facing threats.
Source: Huasheng Securities
Judging from the trend of Tesla's stock price, Tesla's high point is showing a gradual downward trend, and the whole is in a large "trumpet-type" finishing range, and this form is not a good thing for the stock price.
Second, Musk wants to buy Twitter in cash, which could have a significant adverse effect on Tesla's stock price. After all, Tesla stock, the main source of Musk's wealth, can only be acquired by selling cash. Previously, when Musk sold Tesla shares, it has caused a large drawdown in the stock price.
Of course, Musk has other methods, such as using Tesla, SpaceX, etc. for financing, but this acquisition drama is not substantially beneficial to Tesla.
As far as Tesla itself is concerned, in the context of the current high oil prices, Tesla's Berlin Gigafactory in Germany and the Texas factory in the United States have begun to put into operation, and after the further release of production capacity, Tesla's sales may continue to rise. Huaxi Securities expects Tesla's four major factories to reach a production capacity of about 2.3 million units by the end of 2022.
Coupled with Tesla's good brand power and product strength, future sales still have a strong guarantee. However, the risk of short-term Tesla stock price shock adjustment also has to be prevented.
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