Tesla’s share price fluctuates despite record earnings

With supply disruptions weighing down electric vehicle stocks, Tesla’s [TSLA] share price initially saw a much-needed boost after releasing a surprisingly upbeat first-quarter earnings report.

The stock jumped 1.2% to close at $738.20 on 26 April — the day of its earnings release — which added $8.4bn to its market value and raised its performance for the month-to-date to 10.5%.

However, the stock has since fallen to close 27 April at $704.74, down 4.5% from the previous day. This saw its growth for the month so far sit at a more modest 5.5%.

The tumble came off the back of a disappointing first-quarter performance for Tesla’s share price. The electric vehicle pioneer’s stock declined by 5.4% throughout the first three months, despite hitting a 52-week intraday high of $900.40 on 25 January.

According to ETF.com, 62.3 million Tesla shares were held across 222 ETFs in the US. The Simplify Volt RoboCar Disruption and Tech ETF [VCAR] has the largest allocation of Tesla shares of any ETF, according to ETF.com, and as of 27 April the stock had a weighting of 16.63%. The fund climbed 1.2% on the day of Tesla’s earnings release, but was down 9.4% for the year to 27 April.

Tesla’s share price was down 0.1% in the same period, and both the stock and the autonomous vehicle fund have underperformed the S&P 500’s 11.5% climb in the same period.

A record quarter

“Tesla achieved record production, deliveries and surpassed $1bn in non-GAAP net income for the first time. We have seen a real shift in customer acceptance of electric vehicles, and our demand is the best we have ever seen,” Elon Musk, CEO of Tesla, said in the first-quarter results earnings call.

"Our [Tesla's] demand is the best we have ever seen" - Elon Musk, Tesla

The company’s first quarter saw a typical, seasonal slowdown in demand. However, booming sales of 184,800 deliveries, driven by its Model Y sport utility vehicle, pushed its revenue up 74% from the year-ago period to $10.39bn.

Tesla’s earnings also jumped to $0.93 per share from $0.23 in the first quarter of 2020, in part thanks to trimming its position in Bitcoin by 10% — the company invested $1.5bn in the cryptocurrency throughout the quarter.

It also clocked $518m from sales of environmental credits, which Frank Schwope, an analyst at NordLB, took as an indication that most of Tesla’s profits don’t come from the sale of cars, according to Reuters.

Garrett Nelson, a senior analyst at CFRA, told CNBC that he thinks “the real factor that drove the $0.15 earnings beat on the bottom line was the better-than-expected margins”.

Tesla’s automotive gross margin of 26.5% for the quarter was close to 100 basis points more than in the year-ago period. Nelson also highlighted the fact that the quarter marked its sixth earnings beat in the past seven. “That’s the real difference with this story. They’re finally executing.”

Looking ahead, Musk told investors on the call that the company was developing one of the strongest hardware and software artificial intelligence (AI) teams in the world. “I think long-term people will think of Tesla as much as an AI robotics company as we are a car company or an energy company,” he said.

Digesting the numbers

Tesla’s guidance for the full year was not specific. But with production and deliveries set to commence at its Gigafactories in Berlin and Texas, the company expects to see a 50% average annual growth in vehicle deliveries.

For Daniel Ives, an analyst at Wedbush, the company’s first-quarter record delivery growth was a “mic drop” number, according to MarketWatch. Following the release, he gave the stock a buy rating and raised his price target to $1,000 from $950.

“We now believe Tesla could exceed 850,000 deliveries for the year with 900,000 a stretch goal, despite the chip shortage and various supply chain issues lingering across the auto sector,” Ives said.

"We now believe Tesla could exceed 850,000 deliveries for the year" - Dan Ives, Wedbush

He added that “eye-popping delivery numbers coming out of China cannot be ignored with the trajectory on pace to represent circa 40% of deliveries for Musk and company by 2022”.

His bullish sentiment was mirrored by analysts at JPMorgan and Cowen, who also raised their price targets following the earnings announcement. JPMorgan reportedly targeted a price of $155 earlier this month, while Jeffrey Osborne, an analyst at Cowen, set his at $573.

However, Joseph Spak, MD at RBC Capital Markets, and John Murphy, MD at Bank of America Merrill Lynch, took a more cautious stance. According to MarketWatch, they questioned whether the company could continue to accelerate growth at such a high level.

In the short term, Nicholas Hyett, an equity analyst at Hargreaves Lansdown, forecasts the global shortage in semiconductor chips might limit production, according to Reuters.

Tesla shares were rated a hold based on 26 analysts’ ratings compiled by TipRanks. The stock had an average price target of $646.67, representing an 8.2% decline from its 27 April close of $704.74.