Big factories, big trucks and big Musk: Tesla Q4 earnings expectations

Tesla’s fourth-quarter and full-year 2022 earnings are upon us, and with it expectations from Wall Street for the electric vehicle maker to hit revenue for the quarter of $24.03 billion and adjusted earnings per share to land around $1.13, according to Yahoo Finance data. If Tesla hits that revenue estimate, it’ll mark a record for the company, but also the slowest pace of growth since mid-2020.

As usual, Tesla will share its results Wednesday after market close, and management will discuss the earnings and answer analyst questions during a webcast that will he held at 5:30 p.m. ET.

The automaker is closing out a tumultuous year in which its stock price fell 65% due to factors ranging from CEO Elon Musk’s distraction with Twitter to fears over slowing sales in a pandemic-affected China. Tesla is expected to address these concerns, as well as its recent vehicle price cuts and missed Q4 delivery estimates, during the call tomorrow.

In fact, so much has happened over the last few months in Tesla-land that Dan Ives, a managing director at Wedbush Securities, said the upcoming earnings call and guidance commentary will be “one of the most important moments in the history of Tesla and for Musk himself.”

Before we dive into our expectations for the call, let’s note that Tesla shares closed Tuesday at $143.89, rallying more than 30% since earlier this month after shedding two-thirds of its value from April 2022.

An appearance from Musk

Musk doesn’t always join Tesla’s earnings calls — and is in fact currently busy defending himself in court over claims that he defrauded investors with his infamous 2018 “funding secured” tweet — but the CEO is expected to make an appearance tomorrow, if only to assuage investor fears that he’s not giving Tesla enough of his attention since taking over Twitter.

The executive also went to trial in November to defend his $56 billion Tesla pay package after a shareholder filed suit to rescind the deal, which he said was given unjustly to Musk, a “part-time CEO.”

Missed delivery estimates

During Tesla’s third-quarter earnings call, Musk promised Tesla would deliver an “epic end of year.” The automaker set record vehicle sales and deliveries, but still missed its own and Wall Street estimates. In part fueled by last-minute discounts to Model Y and 3 vehicles in December, Tesla delivered 405,278 vehicles in the fourth quarter. The street had expected anywhere from 420,000 to 425,000 units to be delivered.

Analysts will likely question the company on its misses, as Q4 marked the third quarter in a row that the automaker didn’t make it to as many deliveries as it promised. Tesla might be called on to provide more realistic estimates for 2023.

We might also see updated delivery and sales numbers for the fourth quarter when earnings are released.

Margins on vehicle price cuts

Earlier this month, Tesla lowered the price of its long-range Model Y crossover (20% to $52,990) and Model 3 sedan (14% to $53,990) for U.S. buyers. The new, lower base price of the vehicles qualifies them for the $7,500 federal tax credit under the Inflation Reduction Act (IRA), which was signed into law in August. Under the terms of the IRA, the threshold for electric sedans is $55,000 and for SUVs, pickup trucks and vans is $80,000.

Tesla also lowered the prices of its Model S sedan and Model X, which are still too expensive to qualify for the EV tax credit.

The most recent price slashes mark at least the fourth time the automaker has discounted its vehicles or offered credits in the past several months. Tesla announced price cuts in China up to 9% on the Model 3 and Model Y in October, reducing prices further by nearly 14% earlier this month. The company also issued first a $3,750 discount for Model Y and 3s in the U.S. and Canada in early December, before kicking it up to $7,500 later in the month.

Investors have not taken kindly to the price cuts, which they feared signaled a dip in demand for the iconic EVs. However, the price cuts seem to have in fact boosted demand for the vehicles. What investors will be hoping to gauge is whether the price cuts have cut too significantly into Tesla’s margins. It might be too early to have those answers, but Tesla will likely provide some guidance.

Updates on new gigafactories

Tesla announced Tuesday plans to invest $3.6 billion more into its gigafactory in Nevada, adding two new facilities dedicated to building battery cells and Tesla Semis. The automaker might discuss these plans further, such as when they hope to break ground on the facilities and start production.

The automaker has said it has a multi-year plan to boost production by 50%, so analysts will want to hear about other new gigafactories. There have been reports that Tesla is planning a $10 billion gigafactory in Mexico, and the company is getting close to a deal to build factories in Indonesia, as well.

More on the Semi and Cybertruck

Tesla finally revealed in December its first production versions of the long-delayed electric Semi, handing over the first few of Pepsi’s order of 100 trucks, which the company ordered back in 2017. A number of high-profile companies, including Anheuser-Busch, Pepsi, Walmart and UPS, also reserved Semis, so we might get some updates on production and when those companies can expect deliveries.

Tesla’s Cybertruck has also suffered multiple delays, but Musk said in July that the company was on track to launch the truck toward the middle of this year. We’re expecting further updates on timing, as well as new features. In September, Musk said the Cybertruck would be “waterproof enough to serve briefly as a boat.”