Investor's Corner
Tesla’s Q2 Earnings Call and how it differs from 2020’s in a big way
Tesla (NASDAQ: TSLA) is set to report Earnings for Q2 2021 later today. Just a year and four days after it revealed its financial performance for Q2 2020, its performance during the second quarter of this year is vastly different from that of last year. With an emerging need for the company’s vehicles and energy products, along with the potential to extend its quarterly profitability streak to eight consecutive quarters, let’s take a look at how the two quarters have differed and what is expected from analysts on the day of the call.
Q2 2020 vs. Q2 2021
Tesla’s Q2 2020 remains one of the biggest “what-ifs” in Tesla’s short and storied history. While the company was riding a wave of momentum due to its three straight reported quarters of profitability, speculation persisted that Tesla might have had issues extending this streak in Q2 ’20. It was a simple enough reason as well. The COVID-19 pandemic was ripping through the world, and Tesla, despite its apparent immunization when it comes to the global semiconductor shortage, was prone to uncertainty at its manufacturing plants that spanned from Buffalo to Shanghai.
The pandemic shut down the company’s main production facility in Fremont for most of the quarter. It affected the company’s trending growth of production throughout its vehicle manufacturing facilities, and Tesla reported lower production figures than in Q1 2020, dropping from 102,627 to 88,272. Deliveries, however, increased from 88,400 to 90,650.
Tesla navigated a difficult Q2 with better-than-anticipated numbers, beating Wall Street expectations with $6.036 billion in revenue, eclipsing Wall Street estimates of $5.146 billion.
In terms of deliveries and production figures, Tesla continued growth, rising from 180,338 production and 184,800 deliveries in Q1 2021 to 206,421 and 201,250 in Q2. These numbers were attributed to the mass-market Model 3 and Model Y, accounting for an overwhelming percentage of each category for each of 2021’s quarters so far. The Model S and Model X were not being produced during Q1, and deliveries of the Model S Plaid started in Q2. The Model X delivery timeline has not been detailed, but Tesla’s website states the vehicle is set to begin deliveries in January-February 2022.
Situations were vastly different from Q2 ’20 to Q2 ’21. Last year’s second quarter was widely up in the air on what Tesla would report. Its ability to hit profitability once again wasn’t much of a shock to Tesla bulls, but others were impressed by the continuing growth story despite tough economic times. The Q2 showing may have contributed to the automaker’s stock soaring into the stratosphere. Already on an upward trend, the stock would continue to increase in value, peaking out at $900.40.
What analysts are saying on the day of Tesla Earnings
Analysts have already put forth their expectations for Tesla’s Earnings Call later today, but some are still putting in their last two cents as market close comes closer.
Tesla investor and former critic Jim Cramer stated earlier today that he expects CEO Elon Musk to talk about competition and the upcoming release of the Tesla Cybertruck. Cramer sees Tesla’s imminent entrance into the pickup market as the company’s introduction to disrupting Ford’s domination of the U.S. passenger truck sector.
“What he [Elon] has to deal with for the first time is competition,” Cramer said. “Let’s see what he does with the challenge of others,” he added, sprinkling in details about Lucid’s introduction to the New York Stock Exchange earlier today.
Oppenheimer’s Colin Rusch, interestingly, said that the firm isn’t “super concerned about results this quarter.” Instead, Oppenheimer will be paying close mind to Tesla’s updates of the ongoing construction projects in Austin, Texas, and Germany at Giga Berlin, along with the progress of Full Self-Driving. “From a technology perspective, the progress on autonomy is really the heart of the matter if you’re making a bullish bet here,” Rusch said to Yahoo Finance.
Tesla recently announced that it would offer a $200 per month subscription version of the $10,000 Full Self-Driving suite. Rusch said there is potential for between 10 and 20 million customers during the latter half of this decade. “You get to some pretty heavy numbers from a cash flow perspective, and I think that’s what’s going to be at stake here for the next couple years.”
$TSLA Performance on Earnings Day
At the time of writing, Tesla stock was up over 2.1%, or $13.60, trading at around $656.88. The stock was up over 3% earlier in the day. The anticipation for an extended profitability streak and potential updates regarding the 4680 battery cell, Giga Texas, and the Cybertruck, may have contributed to the increase in price ahead of the call.
Tesla will report its Earnings for Q2 2021 tonight at 5:30 PM EST, 2:30 PM PST. Prior to the call, Tesla will issue its Q2 2021 Update Letter on the Investor Relations website.
Disclosure: Joey Klender is a TSLA Shareholder.
Tesla has scheduled its Earnings Call for Q4 and Full Year 2025 for next Wednesday, January 28, at 5:30 p.m. EST, and investors are already preparing to get some answers from executives regarding a wide variety of topics.
The company accepts several questions from retail investors through the platform Say, which then allows shareholders to vote on the best questions.
Tesla does not answer anything regarding future product releases, but they are willing to shed light on current timelines, progress of certain projects, and other plans.
There are five questions that range over a variety of topics, including SpaceX, Full Self-Driving, Robotaxi, and Optimus, which are currently in the lead to be asked and potentially answered by Elon Musk and other Tesla executives:
- You once said: Loyalty deserves loyalty. Will long-term Tesla shareholders still be prioritized if SpaceX does an IPO?
- Our Take – With a lot of speculation regarding an incoming SpaceX IPO, Tesla investors, especially long-term ones, should be able to benefit from an early opportunity to purchase shares. This has been discussed endlessly over the past year, and we must be getting close to it.
- When is FSD going to be 100% unsupervised?
- Our Take – Musk said today that this is essentially a solved problem, and it could be available in the U.S. by the end of this year.
- What is the current bottleneck to increase Robotaxi deployment & personal use unsupervised FSD? The safety/performance of the most recent models or people to monitor robots, robotaxis, in-car, or remotely? Or something else?
- Our Take – The bottleneck seems to be based on data, which Musk said Tesla needs 10 billion miles of data to achieve unsupervised FSD. Once that happens, regulatory issues will be what hold things up from moving forward.
- Regarding Optimus, could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling, and how has their integration impacted factory efficiency or output?
- Our Take – Optimus is going to have a larger role in factories moving forward, and later this year, they will have larger responsibilities.
- Can you please tie purchased FSD to our owner accounts vs. locked to the car? This will help us enjoy it in any Tesla we drive/buy and reward us for hanging in so long, some of us since 2017.
- Our Take – This is a good one and should get us some additional information on the FSD transfer plans and Subscription-only model that Tesla will adopt soon.
Tesla will have its Earnings Call on Wednesday, January 28.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
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