Since hitting a 52-week high of $1,243.49 during intraday trading on 4 November, the Tesla [NASDAQ:TSLA] share price has plummeted roughly 30%. But having just notched up another record quarter for vehicle deliveries, could the stock be on the road to recovery?
Tesla share price slides from November highs
The Tesla share price is currently sitting at its lowest level since October. Just in the last month, the shares have decreased by about 18%, broadly in line with the Nasdaq’s 16% decline. Although Tesla’s shares have had a bumpy three months, zoom out a little further and one sees that the stock is still up more than 30% over the last six months. As investors await the company’s Q4 results, there are reasons to believe that Tesla’s share price could be about to turn a corner, but investor sentiment is being subdued by a somewhat gloomy near-term economic outlook.
Tesla ramped up vehicle deliveries in Q4
Tesla announced in early January that it delivered a better-than-expected 308,600 cars in the last three months of 2021, up from 241,000 in Q3, setting a new single-quarter record. That took Tesla’s total number of vehicle deliveries last year to 936,172, and the addition of extra manufacturing capacity could help the company surpass that tally in the coming year. Consensus estimates suggest that Q4 profits could come in at a record $2.24 a share, exceeding the Q3 figure of $1.86.
In Q3, revenue came in at $13.76bn – another record, even though it fell short of expectations of $13.91bn – on automotive margins of 30.5%, up from 28.4% in Q2. After the company reported its Q3 earnings in October, the Tesla share price climbed roughly 20%, while the company’s market capitalisation soared above $1tn. Investor sentiment was boosted by the announcement at the end of October that the vehicle rental company Hertz had placed an order with Tesla for 100,000 cars, said to be worth $4.2bn. However, it later transpired that the deal had not been finalised. Since November the Tesla share price has trended downwards.
The last quarter of 2021 was an eventful period for Tesla, with Elon Musk selling 10% of his stake in the business to pay a large tax bill, as sales continued to improve. The company delivered a record 308,600 cars, of which roughly 96% were Model 3 and Model Y – a percentage that is in line with recent quarters. In the year ahead, the company hopes to deliver more than 1m vehicles. Musk said in October that he was looking to increase production by more than 50% annually.
New factories could drive growth in 2022
The target of delivering more than a million vehicles this year is set to be fuelled by new manufacturing capacity, as Tesla plans to fully open plants in Austin and Berlin this year. The Austin factory will help ramp up production of Model Y cars, though the start date for Cybertruck production is being pushed back to 2023.
Tesla’s fundamentals appear encouraging. The company has announced another record quarter for vehicle deliveries, analysts are forecasting record quarterly profits, and manufacturing capacity is being expanded.
However, Musk remains a somewhat unpredictable figure, and markets appear jittery amid growing concerns over high inflation, the withdrawal of stimulus measures in the US, fears of a possible economic slowdown, and Russia’s military buildup on the Ukrainian border. The Nasdaq has fallen around 15% over the past month, and may be sailing towards further headwinds.
In these uncertain times, it will be interesting to see how markets react when Tesla announces its Q4 results after markets close on Wednesday 26 January.
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