Tesla knocks the ball cap off: here’s how to play now

Holly Toledo, Batman! Tesla (TSLA), in case you haven’t heard, released the company’s first-quarter financial results Wednesday evening. To put it mildly, CEO Elon Musk and the company have removed the ball cap. Before we begin, a simple disclaimer…

I’m short on TSLA, as of this morning. A trade, not a position of conviction. Whenever I am asked or intend to write my opinion about a particular stock, from that point on, I am frozen in time. If I am tall, short or flat, this is exactly the way I should stand even after my article is published (it becomes public information). This often puts me at a disadvantage for short-term trading, as it is today. It’s not the end of the world. I will not let a short and small trading position affect my view.

For the company’s first quarter, Tesla reported adjusted earnings per share of $3.22 (GAAP EPS of $2.86), lowering expectations by nearly a full dollar. The company generated quarterly revenue of $18.76 billion. That number was good for an annual growth of 80.6%, and it outperformed Wall Street by about $920 million. Automotive revenue increased 87% to $16.86 billion, of which regulatory approval was $679 million. The real story was in margin expansion. Tesla had a 32.9% auto gross margin, up from 26.5% for last year’s comps, a 29.1% GAAP gross margin, up from 21.3%, and an adjusted EBITDA margin of 26.8%, up from 17.7%.

Net cash from operating activities increased 143% year-over-year to $3.995 billion. This resulted in free cash flow of $2.228 billion, which is a staggering 660% increase from $293 million in the same period last year.

Practically speaking…

Tesla produced 305,407 vehicles for the quarter, 291,189 of which were Models 3 and Y. The balance was Model S and X. This total was good enough for annual growth of 69%. As we’ve known for three weeks, Tesla delivered 310,048 vehicles during the three-month period, an increase of 68% over last year. Vehicle rentals for the first quarter ended at 128402, up 55%. There are now 3,724 Supercharger terminals (up 38%) and 33,657 Supercharger connectors (up 37%).

As for capacity, the Austin, Texas facility has begun delivery of the Model Y, but it’s still in its early ramp-up, as is the Berlin, Germany facility that just started production in March. California is still in normal production with a capacity of 500 thousand Model 3 and Y, and 100 thousand Model S & X. The amazing thing, I think, is that Tesla has produced a record quarter despite the shutdown in Shanghai where the Chinese Tesla facility is located. That facility, which has been running erratically this spring, is capable of producing 450 thousand+ Model 3 & Y.


The company still expects to achieve an average annual growth of 50% in vehicle deliveries. This growth rate depends on the capacity and efficiency of the company’s operations and equipment as well as the stability of the supply chain, which can remain an issue. The press release states… “Our factories have been operating below capacity for several quarters as supply chains become the main limiting factor, which is likely to continue through the remainder of 2022.”

balance sheet

Tesla ended the first quarter with net cash of $18.013 billion and current assets of $29.05 billion. Both numbers are up slightly from last year, as well as before the quarter. Current liabilities grew to $21.455 billion primarily as a result of growth in payables that exceeded accounts receivable. This left the company with a current ratio of 1.35, which is healthy. Even if the inventory entry ($6.691 billion) is deleted from current assets, Tesla’s fast ratio comes to 1.04. This assumes that the company’s inventory is worthless, which it is not, and strengthens the validity of this balance sheet on current terms.

Total assets are $66.038 billion, which dwarfs total liabilities minus equity of $30.632 billion. I think it’s important to note that Tesla’s entry for “goodwill and net intangible assets” is only $454 million. Not offensive in the least. Sure, the Tesla brand name alone is worth much more than that. Tesla Sarge easily passes the balance sheet test.

Wall Street

I can find only six sell-side analysts rated three stars or better by TipRanks who have also used Tesla since these earnings were released. Of these, four are ‘buy’ or ‘equivalent buy’, and two are ‘hold’ or ‘equivalent’. The average price target for the six is ​​$1,176.67, up by $1,400 (Dan Ives of Wedbush, 5-star) and $950 (Road Lash of Wolf Research, 5-star).


On the call, Musk indicated that the company has a reasonable chance of 60% production growth for 2022. Musk also talked about the Robotaxi (currently) scheduled to go into production in 2024. The Robotaxi will have no steering wheels and no pedals for acceleration or braking. Robotaxi will also run at a very low cost per mile. Cybertruck has also caught a male. This car is scheduled to go into production in 2023.

My thoughts

There are two potential downsides to the stock. One of them may be that the supply chain for production conditions is getting worse. Certainly this is possible given that Austin and Berlin haven’t really ramped up yet, and given that Shanghai has become less reliable like the recent wave of Covid in this part of the world. The way Beijing is dealing with Covid has made it difficult for companies to operate close to normal in that region. The other would be evaluation. TSLA is trading at roughly 92 times future earnings. They might come to that rating, but this market has been volatile and sellers know where to go when the air is out of the balloon.

Having said all that, Tesla has distinguished itself in times of tight supplies, in times of high inflation, and compared to all of its competitors…even Ford Motor (F) and General Motors (GM) have mass production experience that other electric car makers probably don’t. , but they are still trying to build the electric capacity themselves.

Readers will see TSLA, on the gap this morning…trying to hit the pivot on exit from the January-April Cup by shaping the handle and taking off from the 21-day moving average. The stock is clearly not overbought. The relative strength is neutral and the daily MACD is spinning in the right direction, but we still need to see a bullish crossover of the 26-day moving average by the 12-day moving average. Heck, the full stock oscillator is just a peek out of technically “oversold” territory.


Axle: $1,153

If the stock can hold that spot, that would open the door for a price target of $1,384. If I was long, I would drag my mental stop to the 21 day ($1010) streak. As for me, I have a small short trade at $1040 which I have to correct now. have a great day.

Sarge it.

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