Tesla Inc. TSLA 0.10% is poised to report a record quarterly profit for the last three months of 2022 as Wall Street hungers for clarity on the company’s growth plans amid apparent demand weakness.
Elon Musk’s electric-car maker will report fourth-quarter profit of nearly $3.8 billion, up about 62% year over year, even as vehicle shipment growth slows, according to analysts polled by FactSet.
Based on the release of results after the market close on Wednesday, Tesla is expected to have generated revenue of about $24.7 billion for the period, up nearly 40% year over year, FactSet data shows.
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However, Wall Street’s confidence in the electric vehicle maker has been shaken as the company faces challenges including higher interest rates, tougher competition and declining brand awareness. In 2022, Tesla missed its annual growth target, losing about $675 billion in market valuation and experiencing a 65% stock price decline, its largest annual decline to date. The stock has since recovered somewhat.
In the first few weeks of the new year, Tesla attempted to stimulate demand, in some cases cutting vehicle prices by nearly 20%, an unusual strategy by traditional auto industry standards.
Mr Musk, the company’s chief executive officer, announced the move last month, hinting on Twitter that the economic environment is forcing a choice between growth and profit.
“My bias would be to say … let’s grow as fast as we can without jeopardizing the company,” he said.
The company has historically been cash-strapped, but is navigating the current economic turmoil from a relatively strong position. Consecutive winning streaks have helped build a cash pile, prompting some investors to call for a sizeable share buyback. In October, Mr Musk said Tesla could target a $5 billion to $10 billion share buyback in 2023, although he recently warned, “It wouldn’t be wise to do a buyback and then find the recession is worse than it was 2009.”
Photos: The EV rivals aim for Telsa’s crown in China
Tesla has a higher operating margin than many of its peers, giving it more leeway to absorb price cuts. Analysts expect the company to grow about 46% to about 1.91 million vehicle deliveries in 2023, below its long-term annual growth target of 50%.
Tesla is aiming to sell 20 million vehicles annually by 2030, a milestone that would easily make it the largest automaker by volume. Mr. Musk said achieving that feat would likely require about a dozen factories.
The company announced Tuesday that it plans to invest more than $3.6 billion in an expansion in the Reno, Nevada area. This includes money for two new factories in which Tesla says it wants to manufacture battery cells and increase production of the trailer truck launched in December. The company has also submitted documents to expand its facility near Austin, Texas.
Tesla finished the worst year in its stock’s history, losing roughly $675 billion in market valuation in 2022 — the same year CEO Elon Musk bought Twitter. But the reasons for the sell-off go well beyond the social media company. WSJ’s Sean McLain explained. Photo illustration: Amber Bragdon/Getty Images
Tesla, meanwhile, is expected to enter the pickup truck market later this year with its long-awaited Cybertruck, challenging bids from Ford Motor Co. and Rivian Automotive Inc.
Tesla’s recent price adjustments have undercut some competitors’ electric vehicles and created mixed feelings among consumers, prompting some to proceed with a purchase while angering certain Tesla owners.
John White, a retiree in Scottsdale, Arizona, was inspired to take delivery of his white Model Y in December after Tesla offered it a $3,750 rebate in a race to boost year-end earnings. This brought the vehicle cost before upgrades, fees and taxes down to $62,240. That vehicle is now priced at $53,490 after Tesla cut prices this month.
“I just feel like a pawn in their ‘let’s do the numbers’ game,” said Mr. White, who otherwise likes the crossover vehicle, his first Tesla.
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The company did not immediately respond to a request for comment.
The release of Tesla’s findings comes amid a federal lawsuit in San Francisco over Mr Musk’s 2018 tweets that suggested Tesla be taken private. Investors say they have lost billions of dollars over Mr Musk’s statements, some of which a judge has ruled untrue. Mr Musk testified Tuesday that he tweeted about a potential deal because he wanted to share his thoughts with shareholders and convey that funding was not an issue.
Mr. Musk has said he’s spent a lot of time flipping Twitter Inc. since buying the company in October, prompting some Tesla investors to invest more time in the automaker. The billionaire has announced he will hand over Twitter to someone else.
Write to Rebecca Elliott at [email protected]
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