Despite a miss on earnings, the Tesla shares surge was seen up to 20% to $164.00 within hours of the results being announced on Tuesday after the company said it would accelerate the launch of more affordable vehicles, countering reports earlier this month the company would scrap these plans.

Tesla Q1 revenue declines

Tesla reported a 9% decline in Q1 revenue on Tuesday, the biggest drop since 2012, and it also missed analysts’ estimates, as the electric vehicle company weathers the effect of ongoing price cuts.

A surge in Tesla shares were seen in extended trading after CEO Elon Musk told investors that production of new affordable EV models could begin sooner than expected.

Tesla earnings

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Tesla earnings per share: 45 cents adjusted vs. 51 cents expected

Tesla revenue: $21.30 billion vs. $22.15 billion expected

Revenue declined from $23.33 billion a year earlier and from $25.17 billion in the fourth quarter. Net income dropped 55% to $1.13 billion, or 34 cents a share, from $2.51 billion, or 73 cents a share, a year ago.

Capital expenditures rose to $2.77 billion, up 34% from a year earlier.

Free cash flow turned negative in the quarter, with the company reporting a deficit of $2.53 billion. A year ago, Tesla reported free cash flow of $441 million, a number that reached $2.06 billion in the fourth quarter. Tesla attributed the negative figure to a $2.7 billion buildup in inventory and $1 billion in capital expenditures on “AI infrastructure.”

Revenue in Tesla’s energy division increased 7% to $1.64 billion, while services and other revenue rose 25% to $2.29 billion compared to the same period last year.

Sales drop of Tesla

The drop in sales was even steeper than the company’s last decline in 2020, which was due to disrupted production during the Covid-19 pandemic. Tesla’s automotive revenue declined 13% year over year to $17.38 billion in the first three months of 2024.

Tesla Model 2 launch,

Musk said on the call that the company plans to start production of new models in “early 2025, if not late this year,” after previously expecting to begin in the second half of 2025. Musk also touted Tesla’s investments in artificial intelligence infrastructure, and said the company is in talks with “one major automaker” to license its driver assistance system, which is marketed in the U.S. as the Full Self-Driving, or FSD, option.

In its shareholder deck, Tesla reiterated a pessimistic outlook for 2024, telling investors that “volume growth rate may be notably lower than the growth rate achieved in 2023.”

Tesla shares

Prior to the surge in shares after hours, Tesla shares were down more than 40% this year, reaching their lowest since January 2023, on concerns about weak deliveries, competition in China and the company’s ongoing price cuts.

Earlier this month, Tesla reported an 8.5% year-over-year decline in vehicle deliveries for the first quarter.

Slow EV sale

Sales growth across EVs is slowing, and Tesla and key rivals have been slashing EV prices to try to spur demand. Tesla’s gross profits plummeted 18% in the first quarter, partly due to price cuts this year.

After discussing operational challenges in the first quarter, including Red Sea supply chain disruptions, Musk said on the call that, “We think Q2 will be a lot better.”

Tesla said total sales included revenue from earlier sales of its FSD option. The release of a feature called Autopark in North America allowed the company to recognize the deferred revenue.

Restructuring at Tesla

Tesla embarked on a massive restructuring this month, with two executives, Drew Baglino and Rohan Patel, resigning. Musk said last week in a memo that the automaker was cutting more than 10% of its global workforce.

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So what happens when he suddenly announces they broke up? The Internet panics, that’s what.

On December 20, 2020, he had gone so far as to tweet “Bitcoin is my safe word.”

The B word is not to be mentioned – Bitcoin and Breakup

But on July 20, 2022, Tesla shocked the world with its earnings report. No, it did not make record-breaking profits, rather it sold off two-thirds of its Bitcoin holdings. The Internet was shocked to say the least.

A hardcore crypto evangelist Musk did not tell anyone about his move until he was forced to do so, through the Q2 earnings report for 2022. People took to Twitter to call him out for reneging on his promise to stick by crypto.

Twitter user @conkerhimself tweeted “but I thought it was the future Elon? Oh dear.. how sad..nevermind.” Meanwhile, @mattsheffield posted “While Elon Musk was pretending to buy Twitter, he was unloading 75% of Tesla’s Bitcoins, despite his promise that “Tesla will not be selling any Bitcoin.””

In December 2020, Musk sent Bitcoin soaring on Twitter when he made enquiries about converting “large transactions” of Tesla Inc.’s balance sheet into Bitcoin during a Twitter exchange with Michael Saylor, a digital currency advocate. Following their exchange, the electric carmaker bought $1.5 billion worth of cryptocurrency in February 2021. As news broke about Musk’s sell off, Saylor tweeted “If you sell 75% of your bitcoin, you will only have 25% of your bitcoin left,” seemingly poking fun at the new development.

At the time, it seemed preposterous that Musk would convert Tesla’s holdings into Bitcoin. And now, netizens are enraged that he converted Tesla’s Bitcoin holdings into fiat currency without so much a by-you-leave.

The Aftermath: Tesla Sells Bitcoin

Although tweeple were enraged, shocked, and disappointed, with many resorting to posting memes to give vent to their frustration, there were a few voices of reason that pointed out some fundamental truths.

One such account was of @cz_binance that rightly highlighted the fact that nearly $100 billion worth of Bitcoin gets traded every day. Keeping this in mind, “Someone selling $1 billion is a drop in the ocean.” Tesla added $936 million to its balance sheet after the Bitcoin sale. The world’s most popular cryptocurrency was trading around $24,200 on July 20, but after this revelation its value dropped by almost six percent with the coin hitting $22,700 on July 21.

Trader and Arca’s CIO, Jeff Dorman wrote, “If you’ve ever wondered whether or not trading bots control digital asset trading…keep in mind the entire digital asset market just fell on news that one company (Tesla) sold one asset (BTC) 1-3 months ago.”

Some experts also pointed out that as Tesla is no longer in a position of power for Musk to manipulate the value of Bitcoin, it makes sense for Tesla to sell its holdings. Furthermore, the news also proved that the market is not controlled by trading bots.

Well, it looks like Musk’s relationship with Bitcoin has run its course, but he is still holding out hope for Dogecoin.

Another crypto that seems to be highly favored by the SpaceX CEO is the Dogecoin. In April 2019, he tweeted “Dogecoin might be my fav cryptocurrency. It’s pretty cool.” According to Decrypt, throughout 2019 to 2020, searches for Dogecoin increased whenever Musk hyped up the coin on social media. The cryptocurrency’s value spiked nearly 27% after Twitter announced the takeover deal with Musk.

In the earnings call for Tesla, while Musk did not reveal his views about Dogecoin’s recent fall, he admitted that “We have not sold any of our Dogecoin.”

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“We were able to substitute alternative chips, and then write the firmware in a matter of weeks,” Elon Musk, the co-founder and CEO of Tesla Inc, said. “It’s not just a matter of swapping out a chip; you also have to rewrite the software.”

Tesla Q2 earnings top estimates after record deliveries

The ‘chip swap’ has helped the electric automaker maintain high levels of production, delivering over 201,250 vehicles in the second quarter of 2021. Tesla’s revenue was $11.9 billion in the quarter, including $1.1 billion in profit.

Elon Musk has described Tesla’s profit benchmark as “really an incredible milestone,” while cautioning that the automaker’s growth rate for the rest of the year “will be determined by the slowest part of our supply chain.”

The automaker has set itself an industry leader with a growing portfolio of electric vehicles ahead of traditional players like Ford Motor Co. and General Motors. Analysts have cautioned that the company faces stiff competition from new models being launched by GM, Volkswagen and other companies.

The rise in Tesla earnings doesn’t mean the automaker is immune to the global chip shortages that is hurting its deep-pocketed rivals. The electric automaker disclosed that it will delay the launch of a highly anticipated semi truck AKA the Tesla Semi to some time next year. The Palo Alto, California, company warned that the availability of chips will determine whether it will be able to maintain the production pace so it is able to deliver more than 800,000 vehicles by the end of 2021. The number would be a significant increase from nearly 510,000 vehicles delivered last year, when Covid-19 restrictions during the early stages of the pandemic forced the automaker to temporarily shut down its California factory.

The pandemic uncertainty may have dampened some of the investor response to Tesla’s earnings.

Tesla’s stock gained more than 2% during extended trading on Monday after the Q2 2021 results came out. The electric automaker’s stock has fallen about 25% from its peak price about six months ago.

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Tesla, Elon Musk’s electric car making company reported the fifth quarter of profits, despite dire warnings of a paper tiger by analysts and said that the company is on point with its deliveries of 500,000 cars.

Tesla’s performance against analysts’ expectations:

• Earnings per share (adjusted):76 cents vs 57 cents, per Refinitiv
• Revenue:$8.77 billion vs $8.36 billion, per Refinitiv
• Net income (GAAP):$331 million vs $394 million, per Refinitiv

The company has delivered 139,300 vehicles this quarter.

Tesla’s factory expansion in Austin, Texas and Brandenburg in Germany pushed expenses by 33% from last quarter to $1.25 billion.

Musk, talking about the production facilities during the earnings call, said, “I should make a point that for Berlin and Austin, we do expect to start delivering cars from those factories next year but because of the exponential nature of the spool up of manufacturing plants especially one with new technology, we’ll start off very slow at first and then become very large.”

Tesla previously planned to start production at the Berlin factory in July 2021. But Musk cautioned that it will take another two years to hit full capacity.

Cybertruck delivery was pegged at the end of 2021 “if things go well.”

CFO Zachary Kirkhorn said on Wednesday’s call that Tesla now aims for 500,000 deliveries in 2020, reiterating the company’s earlier guidance during the Battery Day presentation.

 “While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target,” the company said. This will largely depend on increased production at its Shanghai factory and higher output of its Model Y, it said. Tesla must deliver 180,000 cars in the fourth quarter to meet the 500,000 goal.

Kirkhorn acknowledged that Tesla’s third-quarter results were helped by better-than-expected regulatory credit sales. “The regulatory credits business was stronger than our expectations and we are tracking to more than double this year compared to last,” he said. Tesla made $397 million in regulatory credits during the quarter, double the amount it made from these “green” credits year-over-year.

Kirkhorn said that Tesla plans to spend $2.5 billion more in the coming two years on new factories and expansion.

Tesla has managed to raise nearly $7 billion in the past months with its five-for-one stock split and the sale of $5 billion of its common stock in September.

“What jumped out to me is gross margins,” said Gene Munster, managing partner at Loup Ventures. “That’s the machine that keeps the machine growing. They are making more money from each car.”

Tesla’s gross margins went up by more than 250 basis points in the quarter to 23.5%, while operating margins grew to 9.2%.

The strong profits is likely to speed up the company’s inclusion in the S&P Dow Jones Indices. Garrett Nelson, an analyst at CFRA Research, said in a note to clients, “We think TSLA’s fifth straight quarter of GAAP profitability raises the likelihood of the stock being added to the S&P 500 in the near term.”

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