All good things must come to an end, and so the winning streak ends with Dow Jones Industrial Average (^DJI -0.33%), Nasdaq Composite (^IXIC)And S&P 500 (^GSPC -0.67%) For the third straight day, he managed to pull together on Monday and Tuesday. Rising bond yields sent major market gauges lower to retrace some of their gains earlier in the week, sparking fresh concerns about macroeconomic implications.
|
Index |
Daily Percentage Change (declined) |
Daily point change |
|---|---|---|
|
dau |
(0.33%) |
(100) |
|
S&P 500 |
(0.67%) |
(25) |
|
Nasdaq |
(0.85%) |
(92) |
Source: Yahoo! Finance
Earnings season continues to bring new financial reports from key companies in the stock market, and many businesses performed better than some had feared. All eyes were on Wednesday afternoon. Tesla (TSLA 0.84%) And whether the electric vehicle (EV) pioneer can live up to lofty expectations. Despite the strong financial numbers, stocks have been falling, showing how difficult it has been for high-growth stocks to turn a profit lately.
The latest from Tesla
As of 4:45 pm ET today, Tesla shares were down more than 3% in afternoon trading. This wasn’t the sharp drop that the EV maker’s stock experienced after the release of its third-quarter financial results, but it was still a disappointing performance given the strong underlying performance of Tesla’s underlying business.
Many of the numbers were odd. Total revenue rose 56 percent from the previous quarter to $21.45 billion, driven by a 55 percent increase in automotive revenue. Net income more than doubled year-over-year before adjusting for extraordinary items, and after doing so, earnings per share of $1.05 were up 69 percent from 12 months ago. Free cash flow rose 150% to $3.3 billion, helping to boost Tesla’s cash flow and market value on its balance sheet to $21.1 billion.
Tesla mentioned several factors that influence the results. On the sales side, larger supply volumes and higher average selling prices both boosted the top line, along with growth in the non-automotive areas of the business. The stronger US dollar weighed on earnings somewhat, but didn’t stop Tesla from a record performance.
Meanwhile, earnings benefited from the same factors, but higher costs for raw materials and logistics were offset by foreign exchange impacts and the cost of ramping up production at the new Giga plants in Texas and Germany.
Beyond EV production, Tesla’s results have been interesting. Installed solar power was tepid at 94 megawatts, up 13 percent year over year but down more than 10 percent from three months ago. But energy storage capacity rose to 2.1 gigawatts, up from 1.3 gigawatts a year ago, and 1.13 gigawatts in the second quarter of 2022.
Tesla continued to build its network of support services, adding 41 shop and service locations and 79 mobile service units in the past three months. The company now has nearly 4,300 Supercharger stations with approximately 38,900 connections, aiming to serve its growing customer base with the resources they need to stay on the road.
What else can Tesla do?
Given those strong numbers, it’s a little surprising to see Tesla shares fall in price. However, there were a few areas where the company could have offered more to investors.
Perhaps most noteworthy was the bare-bones description of Tesla’s immediate attitude. Reiterating its long-term position, the company strives to achieve a 50% annual average shipment growth to continuously increase production capacity.
Although the latest report reiterated that the automaker is looking for ways to streamline its production and delivery processes to avoid quarterly bottlenecks like the one that occurred at the end of September, it did not commit to any. An exact description of exactly how it works.
Moreover, Tesla has identified battery supply-chain issues as a key restraint to market growth. The company has done its best to supply the materials needed to produce the batteries, but as competitors begin to fight more for the same materials, Tesla could see price pressures.
In the long term, the automaker’s future lies not only in achieving dominance in the EV market, but also in finding complementary opportunities where it can profit from its know-how. That thesis will take years to play out, and in the meantime, Tesla shareholders should be prepared for stock price volatility in either direction — even if it doesn’t seem meaningful.
Dan Caplinger has no position in the mentioned stocks. The Motley Fool has positions and recommends Tesla. The Motley Fool has a disclosure policy.
