Tesla Earnings Call Just Finished. Here Are 5 Things to Know. - Barron's

Tesla reported solid first-quarter earnings Monday evening that beat Wall Street expectations. The stock fell about 2% anyway. There just wasn’t enough important detail in the news release to satisfy investors. There was more detail, however, for investors and analysts to digest on the quarterly earnings conference call.

The call started at 5:30 p.m. eastern time and ran for about 70 minutes. Musk and Kirkhorn talked about a number of issues ranging from Tesla’s recent media coverage to Bitcoin to current production challenges.

Supply Chain Problems

There is a shortage of semiconductors for automobiles and Covid-19 is still making life difficult for the entire global auto business. Tesla’s problems manifested themselves in higher costs. The EV maker was forced to produce and ship parts in locales that were less than ideal. Kirkhorn, however, expressed optimism that profits and margins would improve throughout the year as some of the supply chain issues resolve themselves.

For investors, Kirkhorn’s comment means automotive margins, excluding regulatory credit sales, should rise in coming quarters. That’s something bulls will be on the lookout for.

2021 Deliveries

The industry’s supply chain woes, however, still have the potential to disrupt Tesla deliveries. The company didn’t change its full-year volume guidance, though. Tesla management expects to grow volumes at 50% a year on average for the foreseeable future. They also believe they will do better than 50% in 2021. That puts deliveries somewhere above 750,000 units. Wall Street models about 800,000 deliveries, up about 60% year over year.

This is one area where investors might be disappointed. Clear guidance is preferred. On the other hand, maintaining guidance with the supply chain challenges might be seen as a win.

Production

Tesla is shipping cars from two plants, one in California and the other in Shanghai. Tesla expects both the new Berlin plant and Texas plant to begin producing vehicles in late 2021, with “volume production” in 2022, according to Musk.

With new plants coming on line late in the year, the next couple of quarters for the company will be driven by increased Model Y production in China, as well as producing and shipping the updated Models S and X. New S deliveries should begin next month, with volume ramping up in the third quarter.

Media Coverage

New Model S reviews will give journalists something to focus on. The Plaid version can go from zero to 60 miles an hour in about two seconds. For now, Musk isn’t happy with recent coverage. In particular, he is upset with the stories about Tesla’s driver-assistance functions and the recent Texas crash which killed two, adding journalists who suggested Autopilot might have played a role should be “ashamed of themselves.”

Kirkhorn also talked about Tesla’s full self driving, or FSD, but didn’t address the state of the technology. “We are working on FSD subscription,” said the CFO. “There is a lot of potential for recurring revenue through subscription.” Musk, for his part, remains convinced full autonomous driving can be achieved with optical cameras and without the need for lidar and radar. How to achieve full autonomous driving is an ongoing debate within the auto industry.

Bitcoin

Kirkhorn also talked about why Tesla made its Bitcoin investment. Tesla was looking to earn a return on its excess cash balance and didn’t see a lot of opportunities in traditional options, like short-term bonds and notes. Kirkhorn added he was encouraged by the liquidity offered in the Bitcoin market. Tesla, it appears, had no trouble building a $1.5 billion position in the cryptocurrency. Tesla sold roughly 10% of its position for a “small gain in our Q1 financials.” The size of the gain wasn’t disclosed, but might be available in the company’s quarterly filings. It might have added nickel or so to first-quarter earnings. Tesla reported 93 cents in adjusted earnings per share. Wall Street projected about 80 cents in per-share earnings.

Now what about the stock?

Will the added detail be enough to boost the stock? Investors will have to wait until Tuesday morning to find out. The stock is still down about 2.5% in after-hours trading.

Shares close Monday up about 1.2%. The S&P 500 gained 0.2%. The Dow Jones Industrial Average fell 0.2%.

Write to allen.root@dowjones.com

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