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Tesla misses on gross margin and reiterates lofty goals
Peter Garnry
Chief Investment Strategist
Summary: Investors are used to Tesla beating estimates but last night the EV-maker surprised investors missing revenue and automotive gross margin estimates as the EV-maker faced battery constraints during the quarter and delivery transportation capacity during peak deliveries at the end of the quarter. While the company disappointed against estimates revenue growth was still impressive 56% y/y and the company is reiterating its 50% average growth target over the coming years, something analysts are not agreeing with seeing revenue growth declining to 14% in 2025.
The physical world is tough on Tesla
Tesla shares are down 5% in extended trading following Q3 results showing revenue of $21.5bn vs est. $22.1bn and adjusted EPS of $1.05 vs est. $1.01. Q3 automotive gross margin came in at 27.9% vs est. 28.4%. Tesla says that battery supply constraints remain the key limiting factor on deliveries and scaling up the production; Tesla also mentions that ramping up production of its new battery 4680 cells has proven to be more difficult. In addition, delivery transport capacity was a limiting factor on deliveries in Q3 and the EV-maker is working to smooth this process going forward.
While investors are reacting to the lower than expected revenue growth and gross margin, Tesla is doubling down on its 50% average growth rate target. Back in April, CEO Elon Musk said that the company would deliver 1.5mn cars this year so with around 930,000 deliveries as of the first nine months, the EV-maker must delivery 570,000 cars in Q4 which would be an increase of 86% y/y which seems like a very high bar to climb given the recent quarters growth in deliveries and the constraints mentioned above. Looking at analyst estimates for revenue the analyst community does not buy the 50% growth story as revenue growth is projected to fall from 57% in 2022 to 14% in 2025.
Tesla is not saying much directly on the demand situation as it relates to the current volatility and high prices on electricity which could slow down the transition to electric vehicles. Earlier today, Ally Financial which is one of the biggest US lenders of auto loans said that it sees a slowdown in auto loans and the company also missed estimates.
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