Will Tesla’s Earnings and Guidance Please Investors Again?

Tesla (TSLA) will be announcing tonight, on October 20th, its Q3 earnings, after market close. So far Tesla only missed its Q4 2020 numbers – but for a valid reason explained by the pandemic impact. In all other episodes the company comfortably exceeded expectations, so investors are betting this will be the case once again. But very few of us realize to what extent the current component supply shortage crisis is capable of disrupting the core of any car manufacturer’s business – and Tesla is still one of them.

In Q2 the world’s largest EV maker produced 206,421 vehicles (+151% YoY) and delivered 201,304 vehicles (+121%) during the period with a cash position of $16.2 billion.

The consensus EPS Estimate for tonight is $1.57 vs. $0.76 and the consensus Revenue Estimate is $13.64 billion (+55.5% YoY). In terms of margins the consensus hopes to see it to the tune of 28.4% on free cash flow of around $1.38 billion; and cash and cash on hands of $16.88 billion.

To bolster optimism, the automaker managed to sell over 56K China-gygafactory manufactured vehicles in September alone, up 27% MoM. Such strong Q3 global delivery volumes are apparently pointing to better-than-expected Q3 earnings. However, aren’t investors overplaying these facts and underestimating negative effects?

One thing is obvious: retaining Tesla’s margins is key to maintaining the company’s strong cash flow. Also, Elon Musk must decide on whether he accepts crypto payments as a sustainable option, or considers it a funny experiment which is over. Accepting Bitcoin payments certainly adds potential global buyers and boosts the company’s outlook. Current crypto appreciation forecast is favorable for shareholders to embrace maintaining this option.

In terms of Tesla’s production range, price hikes in the U.S., a mix of more Model Y and new Model S deliveries, and the ramp of production in China could potentially offset at least part of supply chain or chip shortage inflation. At least, for now. Another focus for investors will be Tesla's plans to restart production. Its Berlin and Texas factories remain on track to open within 2021 and are crucial for it to hit a 50% annual growth rate for 2022, likely meaning over 1.3 million deliveries going forward.