Editor’s note: This article was updated on Feb. 1 to correct the spelling of Karl Brauer’s name.
Yesterday brought the earnings call that Wall Street had been waiting for. As the closing bells sounded, both institutional and retail investors prepared to hear from Elon Musk. The Tesla (NASDAQ:TSLA) CEO missed the last earnings call for the previous quarter. This time around, investors had plenty of questions about the company’s plans and what they meant for TSLA stock. Even after the electric vehicle (EV) innovator surpassed expectations with the quarter’s delivery statistics, there has been considerable speculation regarding the company and its industry.
Tesla stock was rising in anticipation of the call, but today it began by falling. Does that mean that Musk reported bad news? Not at all, but there’s plenty to unpack about the company’s previous quarter and the year ahead. There are several top takeaways of which investors should take note.
Investors should begin assessing the quarter by reviewing the basic figures. Tesla beat analyst expectations in both the important categories of adjusted earnings and revenue. It reported earnings for the quarter of $2.52 per share, 16 cents above the expected price of $2.36. Quarterly reported revenue was $17.72 billion, opposite the predicted $16.57 billion.
The initial takeaway from the those important statistics is that Tesla has proved it can remain profitable during a year of growth. That shouldn’t be dismissed as insignificant. It is not, however, one of the key takeaways. Let’s take a closer look.
Takeaway No. 1: The Supply Chain Crisis Is Real
First, let’s look at the bad news. One of the defining market trends of 2021 was the supply chain crisis. It posed constraints for many sectors, and EV producers were among the most impacted. Musk acknowledged on the earnings call that the company was definitely “chip-limited,” confirming that no new models would be released this year. This means that the highly anticipated Cybertruck’s launch date has been delayed until 2023. Additionally, fans shouldn’t expect to see the $25,000 car on the market this year.
This is disappointing for both investors and EV aficionados. However, it doesn’t mean that TSLA stock will suffer in 2022. The call also confirmed that the company is focused on expanding production and getting even more EVs to market. Tesla’s Freemont, California, factory recently set a record for the number of vehicles produced. Musk plans to take it even further, expanding production capacity to more than 600,000 cars this year.
He added that the company’s Giga factory in Austin, Texas, is hard at work on Tesla Model Ys with both structural battery packs and the 4680 cells. He added that they will “start delivering after final certification of the vehicle, which should be fairly soon.”
Takeaway No. 2: Wall Street Has Faith in TSLA Stock
Despite the clear difficulties facing the company, many analysts haven’t soured on TSLA stock. On the contrary, several have raised their price targets since the earnings call, even as shares have fallen today. Yesterday saw both Alexander Potter of Piper Sandler and Adam Jonas of Morgan Stanley issue $1,300 price targets for Tesla stock. Pierre Ferragu of New Street was even more bullish, reiterating a price target of $1,580. All three maintain buy ratings. Dan Ives of Wedbush, a respected voice on Tesla stock, maintained his bullish stance with a $1,400 price target.
Ben Kallo of Robert W. Baird raised the $880 price target he had maintained since October to $1,108. Kallo noted that he had been “encouraged by management’s goal to grow volumes more than 50% in 2022.” Despite maintaining a hold rating, Wells Fargo analyst Collin Langan followed the same example, raising his price target from $860 to $910.
The overarching theme is clear. Wall Street has faith that Tesla’s potential for growth and production capacity outweigh the risk posed by supply chain constraints. We may not be seeing any new models in 2022, but the higher numbers turned out by factories will help the company keep pace with rising EV demand.
Takeaway No. 3: Musk Is Betting Big on Self-Driving Tech
We may not be seeing any new Tesla models released this year, but full-self driving (FSD) tech may be approaching. On the call, Musk called attention to Tesla’s FSD software suite, highlighting it as an area of focus for the company. “I would be shocked if we do not achieve Full Self-Driving safer than a human this year,” he stated.
While this may strike some as a bold prediction, Musk is no stranger to bold. Plus, the company does seem to be making progress in this area. Last week, Musk tweeted that the company would be rolling out an FSD beta in Canada within the next two to four weeks. Musk characterized the company’s progress on this front as the “the most profound software upgrade maybe in history.”
It was also clear throughout the call that Musk considers FSD tech development to be among Tesla’s primary areas of focus. He noted, “Everything pales in comparison to the value of robotaxi or full self-driving.”
If its progress on the FSD front continues, it will prove a significant boon to TSLA stock. That’s likely what Musk has his eyes on. He expressed frustration that the progress being made in the area isn’t being appreciated more. While it’s true that the company’s autopilot feature has drawn some doubt of late, it’s clear that improvements are being made. If Tesla is first to perfect the type of software suite that Musk is clearly envisioning, it will absolutely drive profits considerably, not just due to auto sales but because it will likely have other applications.
The Bottom Line
The earnings call certainly brought both good and bad news for investors. Overall, though, it is clear that the good outweighs the bad. And Wall Street isn’t disagreeing. Musk is focused on two areas in which the company has proven it can excel. Additionally, the buzz surrounding the Cybertruck and Roadster models will help drive momentum around Tesla stock in the year ahead, even if we don’t see actual models on the road too soon.
Karl Brauer, Executive Analyst of iSeeCars had this to say about Tesla stock’s recent performance:
“Every automaker faced an uphill battle in 2021, but very few saw sales and revenue growth at this level. Tesla’s history of breaking its own records while disrupting the industry continues, and with two new plants and multiple new models coming online there’s every reason to believe it will continue. Can Tesla triple its global sales volume in the next 12-24 months, putting it ahead of brands like BMW and Mercedes-Benz, and a third of the way to catching global leaders like Toyota (NYSE:TM) and Volkswagen (OTCMKTS:VWAGY)? With Tesla, you never want to say ‘never.'”
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
