Tesla earnings rocket but not enough to outpace lofty expectations

Tesla Inc (NASDAQ:TSLA) topped US$1bn in underlying profits for the first time in the first quarter of this year and pocketed a large gain from its purchase of Bitcoin, yet still failed to meet Wall Street’s sky-high expectations. After splashing out US$1.5bn on buying Bitcoin in February, the electric car maker revealed a US$101mln “positive impact” and that it had sold 10% of its holding in the cryptocurrency during the quarter, making proceeds from sales of US$272mln. Record first-quarter deliveries, as revealed earlier this month, led to automotive revenues jumping 75% to $9.0bn and total turnover moving up a gear to US$10.4bn from just under US$6bn a year ago, which either just beat or just missed the consensus analyst estimates from Refinitiv and Bloomberg. Net income on a GAAP basis (reported pre-tax profits) of US$438mln was up over 2,600% on the same period last year, the company’s seventh profitable quarter in a row, with earnings per share (EPS) rocketing 1,850% to US$0.39. Adjusted EPS, excluding bonuses and other exceptionals, came out at US$0.93, which beat the Street’s US$0.79 forecast. The performance during the quarter meant that billionaire boss Elon Musk has qualified for two bonus options payouts worth a total of US$11bn. The stock fell in aftermarket trading, as stripping out the regulatory credits, the bitcoin benefit and lower taxes leaves a true earnings figure that was “a large miss”, as brokerage Roth said. Looking under bonnet Underneath the headline revenue figure, strong sales from cars made in the newer Shanghai Gigafactory were partially offset by an 83% decline in higher priced Model S/X vehicles, as Tesla shifted production towards its newer and higher-margin models. Despite the shift in sales and a 13% decline in average sales price, operating margins of 5.7% were up on the preceding quarter’s 5.4% and the 4.7% from same period last year, reflecting lower average manufacturing costs. Due to the launch of new models and the lower costs at the China gigafactory, the average cost per vehicle came in below US$38,000 in the quarter, a massive improvement on the eye-watering $84,000 when it began production of the Model 3 in 2017. Automotive gross margins improved by more than one percentage point to 26.5%, however if the US$518mln made from selling regulatory environmental credits is excluded, automotive gross margins would have been 22%. Net cash in the bank was US$6.3bn at the end of the quarter, down from US$7.7bn at the start of the year, which reflects the bitcoin purchase being treated as a non-cash item. Looking forward, Musk expects production volume growth to exceed 50%, saying the company is on track to start production and deliveries at its new factories in Texas and Berlin. Like all car companies, Tesla has faced a global shortage of microchips, with Musk saying it had “some of the most difficult supply chain challenges” during the quarter. But he said Tesla was “mostly out of that particular problem” as it was able to cope by adapting its software so it could use chips from different suppliers.