The major indices were all trading higher and now lower following a tumultuous overnight session that saw wild swings across financial markets. The Dow has been the strongest among the large-cap benchmarks this morning while the Nasdaq was dragged lower by Tesla (TSLA) and Intel (INTC) which opened deep in the red despite the firms' bullish earnings. In economic news, the first reading of the fourth-quarter GDP print came in at 6.9%, well above both the consensus estimate and the indicator's previous reading of 2.3%, providing justification for the Fed’s hawkish shift.
Stock Pick Summary:
This is a very tough market, but we are ready to milk the opportunities, as we are not worried about the short term instability and are focused on awesome long term opportunities.
Today, we are re-iterating our faith in one of our top performers and believe there is a longer runway for it in next 5 years. Yes, we further add onto our position in Tesla (TSLA) today! As always, the market is ignoring what we believe is a stellar earnings report and choosing to focus on the short term challenges (supply chain woes). Investors are reacting to the announcement that Tesla will not produce new model vehicles in 2022 and is currently not working on the highly anticipated $25k model.
A recap of the stellar earnings:
EPS: $2.54 adjusted, +218% (analysts expected $2.36) Revenue: $17.72 billion, +65% YoY (analysts expected $16.57 billion)
$15.97 billion of Tesla’s reported revenue came from automotive revenues, which were up 71% YoY. The company delivered 296,884 Model 3 and Y models in Q4 (and an additional 11,766 Model S and X models.) As we’ve seen from previous quarters, the decline in Model S and X production was sustained (-19% YoY), mostly at the cost of the Model 3 and Y’s success (+79% YoY.) The company’s takeaway profit and margin rose nearly 6.5% YoY, helping pull up Tesla’s net income and net free cashflow to over $2 billion each. If we look deeper, Tesla pushed 2021 revenue to $53.82 billion, a 71% increase YoY. Pretty impressive for a company that was considered unsustainable and only profitable because of regulatory credit sales (which represented an unimpressive $314 million, -22% YoY, in the quarter.)
Other key updates:
Gigafactory construction in Shanghai, Berlin, and Texas. Tesla also indicated it’s still looking for a place to put its Tesla Semi, Roadster, and “Future Product” production line.
Tesla suggested that it had become an industry leader in GAAP operating margin (TTM) by preserving costs. The company noted its operating margins were 12.1% in 2021, which bested nearly every other vehicle maker.
More than 60,000 vehicles are now operating on Tesla’s Full Self-Driving (FSD) beta. In Q3 2021, that figure was just 2,000. This implies that the company’s self-driving ambitions are in high-gear.
Tesla could achieve 50% average annual growth in vehicle deliveries over a multi-year horizon.
Tesla is ramping up huge production at its Lathrop facility in California which is significant because it may allow the company to focus more on its energy storage business as well. Lathrop will have significant impact on having battery capacity available for the Semi and for autos, not just for energy storage.
The fourth quarter marks Tesla's 10th consecutive quarter of profitability! With as many as 30,000 vehicles rolling off its latest Gigafactory assembly line by the middle of the year, Tesla is set to grow even bigger. Tesla is a growing, profitable car maker that is leading the industry to an all-electric future. That future may not come anywhere near as quickly as some analysts suggest, but Tesla will be there at the forefront and is a driving force for the future of electric cars for the next decade. We are happy to build our position further and potentially watch it propel to new highs over the next 5 years.
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