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Here’s what to look for in Tesla’s earnings call

New York
CNN Business

Tesla shareholders have spent a lot of time following CEO Elon Musk’s big game to buy Twitter. On Wednesday evening, they will once again focus on a company he already controls – Tesla itself.

Tesla (TSLA) releases first quarter results after the bell on Wednesday. Analysts have a rather optimistic view of corporate results.

Tesla’s profits are expected to jump 142% from a year ago. Other traditional automakers, such as General Motors, Ford (F), Toyota (TM) and Volkswagen (VLKAF), are all expected to see lower profits – ranging from a 14% drop at VW to a tumble of 58% at Ford (F) — due to supply chain and production issues.

But how the company fares in the first quarter isn’t Tesla shareholders’ biggest concern. This is what awaits the company. Here’s a rundown of what to look for in its earnings report and call investors.

Nine months ago, Musk announced that he would generally stop participating in the quarterly call, saying it was taking up too much of his time. It lasted exactly a quarter.

By the time Tesla reported record fourth-quarter results in January, he was back on the call, though his comments seemed to do more to worry investors than reassure them.

Now that some investors are concerned that Musk’s attention will be diverted by his offer on Twitter (TWTR), will he be in the game again? There are risks for the company anyway.

“From a perception perspective, if he’s not on the call, that fuels the thesis that he’s too busy with Twitter,” said Dan Ives, technology analyst at Wedbush Securities. At the same time, Musk can be a loose cannon on these calls.

At the start of the pandemic in April 2020, he lashed out at stay-at-home orders in California that temporarily shut down his main factory, calling them “fascists.” If he makes similar comments about much stricter lockdown rules currently in place across much of China, he could anger Chinese authorities, who could make life very difficult for Tesla in the world’s biggest market. of electric vehicles.

Speaking of which, investors will want to know what the production outlook in China is in the face of these lockdown orders.

Tesla reportedly reopened its Shanghai factory this week, although the company has yet to confirm that. Investors will want to know if it can stay open and what is happening with the factories of suppliers of critical parts, such as batteries.

“The main focus of the earnings call has to be sourcing from China,” Ives said. “That’s the biggest overstock for the stock right now. They’ve already lost around 50,000 production cars so far in the second quarter. The question is, are they going to give advice?

Once upon a time, automakers lived and died by their internal combustion engines. Features like fuel injection and metrics like horsepower were key to attracting buyers and getting the best prices.

In the age of electric vehicles, it’s batteries and a whole new set of performance metrics: how far can a car go on a single charge? How fast can it charge? And how much will it cost to build?

Tesla’s next-generation battery is the 4680, which is expected to deliver a breakthrough in both cost and the distance a vehicle can travel on a single charge. Tesla only recently started using the battery in vehicles, and it’s still only available in limited volumes.

The production prospects of this battery and the supply of chips and raw materials it needs to build them are crucial to Tesla’s plans to increase vehicle production.

Over the past five weeks, Tesla began shipping cars from two new factories: one outside of Berlin and one outside of Austin, Texas, where its headquarters are now located.

How quickly it can ramp up production, especially with supply chain issues caused by Covid lockdowns in China and, to a lesser extent, the war in Ukraine, is critically important if the company wants to achieve its growth objectives for the year.

Beyond that, investors will likely be looking to learn more about the new products to be built in Austin, namely Tesla’s Cybertruck pickup and tractor-trailer. No significant production of either is expected until 2023 at the earliest, but it will be a bad sign if they’re pushed back even further, especially as Ford and GM are expected to roll out their own trucks soon. electrical. The Ford 150 Lightning is expected in showrooms this spring. The Silverado EV is slated for release next spring.

Tesla’s market capitalization is greater than the combined value of the world’s 12 largest automakers, not because it’s much more profitable, but because of its growth projections. If it can’t stick to its over 50% annual growth trajectory, the company’s stock could fall.

Finally, if Musk is on the call, it will be especially interesting to see if he comments on his efforts to buy Twitter. So far, his comments have been in broad strokes, not specifics.

And he hasn’t said anything about whether he plans to get involved in the day-to-day running of Twitter.

“There are concerns about Musk, at a time when he should be so focused on Tesla, how can he juggle so many balls?” said Ives.

Musk also did not reveal how he will fund his bid for additional shares, which could cost around $40 billion. Will he have to sell part of his stake in Tesla to find the money? If so, it would likely put downward pressure on Tesla’s stock price.

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