Tesla Inc’s TSLA crushing fourth-quarter delivery turns the focus on how well the company managed costs amid supply headwinds and whether the electric vehicle maker is on track to deliver 40% long-term gross margins when it reports quarterly earnings on Wednesday, according to Loup Ventures analyst Gene Munster.
What Happened: The focus for Tesla’s fourth quarter earnings on Wednesday will be auto gross margins and it should be a win-win for the Elon Musk-led company, Munster said.
Excluding regulatory credits, Tesla delivered 28.8% automotive gross margins in the third quarter, compared with 25.8% in the second quarter ended June.
Munster said he believes the December automotive gross margins for Tesla will be flat, or up slightly, despite the component environment and inflation pressures.
“If they report increasing auto gross margin, investors will become increasingly optimistic about the potential for 40% long-term auto gross margin,” Munster said on Loup TV.
“I actually think that they're going to defy the odds of logic — either have them flat or up slightly. I think that's probably going to ultimately bode well for Tesla, assuming that the Fed doesn't say something on Wednesday that sends the market into a tailspin.”
Munster, a Tesla bull, has previously said Tesla's impressive profit indicates the company could deliver Apple Inc AAPL-like 40% gross margins. He has forecast Tesla’s sales could jump from $70 billion next year to $400 billion in 2027 and the stock could hit a price of $2,500 a share then.
Tesla smashed fourth-quarter delivery records and posted its biggest volume for both the fourth quarter and the full year, earlier this month. The Musk-led company said it delivered 936,172 vehicles, a jump of 87% compared to 2020 when deliveries came at about half a million vehicles.
Tesla said nearly one-third of its full-year deliveries were from the fourth quarter alone at 308,600 units.
Why It Matters: Legacy auto rivals such as General Motors Co GM and Ford Motor Co F have pinned the blame on chip shortages for historic low inventories at dealerships even as Musk-led Tesla has navigated the crisis well to register an exponential rise in deliveries.
Tesla Chief Financial Officer Zach Kirkhorn had told investors on the third quarter post-earnings call that there’s "an awakening" for electric vehicles and that the company does not have a demand issue but the ability to produce as many cars.
Tesla, in 2017, for the first time delivered over 103,020 electric vehicles. It has since grown by leaps and bounds, delivering 244,920 electric vehicles in 2018, 367,200 units in 2019 and 498,920 in 2020. In 2021, Tesla delivered 936,172 vehicles.
Price Action: Tesla shares closed 5.26% lower at $943.9 a share on Friday. The stock is down 21.3% year-to-date and up 7.2% in the past one year.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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