Tesla TSLA Q3 Results Impress Analysts as Manufacturer Excels Despite Strong Headwinds

von Eva Fox Oktober 20, 2022

Tesla TSLA Q3 Results Impress Analysts as Manufacturer Excels Despite Strong Headwinds

Tesla's Q3 2022 results impress analysts as they show the manufacturer's ability to handle complexity admirably. This was another strong quarter with record revenue, operating profit, and free cash flow.

On October 19, Tesla reported earnings for Q3 2022. It was another strong quarter with record revenue, operating profit, and free cash flow. In the last 12 months, the company's free cash flow exceeded $8.98 and the operating margin reached 17.2% in Q3. Tesla achieved an industry-leading operating margin while encountering material headwinds YoY. Raw material cost inflation impacted its profitability along with ramp inefficiencies at Giga Berlin, Giga Texas, and with 4680 cell production. Also, the U.S. Dollar (USD) continued to strengthen compared to all other major currencies in their markets.

Total revenue grew 56% YoY in Q3 to $21.58. YoY operating income improved to $3.78 in Q3, resulting in a 172% operating margin. Quarter-end cash, cash equivalents, and short-term marketable securities increased sequentially by $2.28 to $21.1B in Q3, driven mainly by free cash flow of $3.38, partially offset by debt repayments of $0.98.

Following the announcement of the results, Wall Street analysts published their take on Tesla. Analysts were unanimous in acknowledging that the company coped well with many headwinds and once again proved its ability to navigate in a complex environment, which makes it stand out from all the others.

Morgan Stanley analyst Adam Jonas called the quarter a clean one for Tesla with earnings per share, despite lower regulatory credits, rising input costs, currency hurdles, and logistics/plant start-up inefficiencies. He noted that free cash flow of $3.38 billion is almost three times the firm's forecast.

RBC Capital Markets analyst Joseph Spak pointed to tailwinds from the Inflation Reduction Act pushing Tesla margins up in 2022 and 2023.

Wedbush Securities analyst Dan Ives maintained his bullish stance on Tesla. He predicted that Tesla will fire off buybacks with its giant cash load to please investors.

“This quarter was a respectable performance in a very difficult environment with delivery and supply chain issues front and center in Europe and China that threw another dose of reality for Tesla which has been Teflon-like over the past few years despite supply chain chaos across the auto/tech world.”

Bernstein's Toni Sacconaghi was unhappy with the Earnings Call and remains unconvinced that Tesla makes sense for investors in terms of risk/reward. However, he acknowledged the company's innovation and financial success.

“While we acknowledge Tesla's innovation and financial success, we continue to struggle to justify the company's valuation... TSLA's valuation appears to imply huge volume and industry-leading profitability going forward, which is historically unprecedented.”

Baird recommended that Tesla should be bought based on the results presented, also highlighting the manufacturer's exceptional ability to handle difficult situations.

“TSLA posted strong Q3 results amidst continuing materials shortages and logistics volatility. Cost per vehicle should improve as delivery smooth paces and TSLA shifts to a more even delivery and production mix geographically. TSLA Semi deliveries are scheduled to begin in Q4 with production ramp accelerating in 2023. Setup for Q4 is strong as gigafactory ramp continues in Austin and Berlin.”

© 2022, Eva Fox | Tesmanian. All rights reserved.

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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.








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