Tesla Delivered Another, Q1 2022, Stellar Results

Tesla (TSLA) reported Q1 earnings for 2022 and beat the consensus estimate on the top and bottom lines. Here are the key numbers.

Earnings per share came in at $3.22 vs. $2.26 expected. Revenue: $18.76 billion vs $17.80 billion expected. Automotive revenue reached $16.86 billion, up 87% from the same period last year. Automotive gross margins jumped to a record 32.9% with Tesla reporting gross profit of $5.54 billion in its main segment. Regulatory credits accounted for $679 million of automotive revenue for the quarter.

Operating cash flow net of capex (free cash flow) increased to $2.2 billion in Q1. Total debt remained at the level of less than $100 million.

Profitability:

Operating income of $3.6 billion under GAAP; Operating margin 19.2% in Q1 while posting $3.3 billion in GAAP net income and $3.7 billion non-GAAP net income in Q1. GAAP Automotive Gross Margin in Q1 came in at 32.9% .

Operations:

Vehicle production and deliveries started from the Berlin factory in March 2022. Production and vehicle deliveries began from the Texas factory in April 2022.

Tesla shares are trading lower by 4.32% at $983.70. Weakness may be caused by profit-taking following the initial jump in the stock recently as well as concerns over China disruptions. Tesla investors would be focused on what the “brutal” three weeks of production halts in China mean for the rest of the year.

According to CNBC, on Tesla’s Q1 earnings call, CEO Elon Musk said Tesla absolutely wants to make EVs as affordable as possible still, but lamented that pricing can be a challenge in the face of shifting macroeconomic conditions. Musk also said he thinks that inflation is worse than reported and is likely to last all year in 2022. Musk’s remarks came in response to an analyst’s questions about recent price increases for Tesla vehicles, and how Tesla plans to make good on its longstanding goal of bringing fully electric vehicles to the masses, in part to reduce people’s reliance on fossil fuels.

The CEO said, “I think the official numbers actually understate the true magnitude of inflation. And inflation appears to be likely to continue for at least the remainder of this year.” In some cases, Musk said, Tesla suppliers are requesting 20% to 30% cost increases for parts from 2021 to 2022. “What’s keeping costs down at least in the short term is that we have locked in contracts with suppliers. Those modular contracts will obviously run out, and then we’ll start to see potentially significant cost increases,” Musk cautioned.

Bottom line: The first quarter of 2022 was another record-breaking quarter for Tesla across multiple metrics such as revenue, vehicle deliveries, operating income and an operating margin of over 19%. The company's outstanding debt fell below $0.1 billion at the end of the first quarter of 2022. Public interest in a sustainable future continues to grow, and Tesla remains focused on growing as quickly as possible. The expansion of the company's production capacity is a priority. However, China’s production disruption factor weighs on further company’s stock performance in 2022.