In Tesla’s history, the reaction to its fourth-quarter earnings report was the worst when it came to an earnings beat.
All of a sudden, what the heck happened to Tesla stock?
Following a better-than-expected fourth-quarter profit report from the company on Wednesday, its shares took a big hit over the last week. Investors and analysts were left dazed and confused after the company made record profits and beat its earnings expectations, but they didn’t know what to do.
That’s right. For the fourth quarter of 2021, Tesla (TSLA) earned $2.54 in adjusted per-share earnings, which was more than the Wall Street forecast of about 2.36 per share. It was the electric-vehicle company’s fourth time in a row that it beat its quarterly earnings. Also, CEO Elon Musk said that growth for 2022 would be “comfortably above 50%.”
The stock price fell by 12 percent after this. Shares rose 2.1% on Friday, ending the week down 10.3%. They closed at $846.35. Over the past 11 years, this is the third-worst reaction to any Tesla quarter that we’ve had. The other two made more sense because some of the company’s results didn’t meet expectations.
In Tesla history, that makes the fourth-quarter reaction to a bad news report the worst that it has ever been. How come? “I don’t really know,” said one analyst when asked about the question. Honest: It’s not an uninformed one, but it isn’t a bad one either. Analysts’ price expectations and earnings all rose after the company reported its results. Even though the Street said things were going to get better, investors didn’t buy Tesla shares.
Others were more than happy to speculate about why the market was reacting the way it did. Tesla CEO Elon Musk said on a conference call that there would be no new cars or trucks on the market in 2022. Roth Capital Partners analyst Craig Irwin said this: “No Cybertruck, no Semi, no MiniCar, no Robotaxis.” When Tesla opens two new plants in Texas and Germany this year, Musk said the “fundamental focus of Tesla this year is scaling output,” which means making more cars.
Having a lot more cars made means more sales. There could also be some worry that Tesla can’t keep selling Model 3 and Model Y cars forever because there will be more electric cars out there. It will be about a year before Tesla’s “Cybertruck” comes out.
In this case, Motor’s (F) electric F-150 Lightning is called Lightning. It’s still Cybertruck’s time that hasn’t changed. On the fourth-quarter call, Musk said that the Minicar, a cheaper electric car, would open up new markets for Tesla. This was a long shot for him to make.
Chip shortages, which added to costs and slowed down production, were also a problem, as were chip shortages. It was almost impossible to get enough semiconductors to make Tesla cars in 2021, but Musk said on the conference call that the company is still hurt by that.
Ford and other companies are going to report their earnings this week, so keep an eye out for that.
(GM), and investors will be watching to see how they deal with the chip shortages that are going on. For the fourth quarter of 2013, GM is expected to make $2.4 billion in operating profit. GM is set to report on February 1. But that won’t be as important as giving you some ideas for the next year. The Street thinks that operating profit in 2022 will be about $13.6 billion, which is about $200 million more than the $13.4 billion it thinks will be made in 2021. People who follow analysts say that even a bad forecast looks like a real risk. In December, GM’s operating profit was estimated to be $13.9 billion. In recent weeks, that figure has dropped to $9.3 billion. All of these things could make share prices go down.
Ford is expected to show how much money it made on Feb. 3. For the fourth quarter, Wall Street thinks the company will make $2.7 billion in operating profit. There will be $12 billion in operating profit all year, up from $10.8 billion in 2021. As with GM, the number in 2022 will be most important. Like GM, Ford’s estimates for 2022 haven’t been going down, but Ford hasn’t. The $12 billion figure is the highest number that everyone agrees on so far.
Despite the fact that Ford stock has been the best of the bunch, there could be a risk to it. Ford shares have risen about 16% over the last three months. About 7% of GM stock has gone down, and about 21% of Tesla stock has gone down.
There are a lot of factors that make Tesla stock look like the best bet over the next few months. Chip supplies and 2022 forecasts will work things out. Value investors would be surprised by that conclusion, but they’re not likely to buy Tesla stock anyway, so they won’t be surprised by it.
There are still a lot of people who think Tesla shares will make a lot of money in 2022. That’s a lot of times, but Tesla is growing the fastest out of all of them by a long way. What’s more, Tesla’s price/earnings multiple is down about 23% from recent averages, as the stock price has gone down and the expectations have gone up.
This is how it works: Ford and GM shares trade for 10.6 and 7.4 times estimated 2022 earnings; that’s a lot cheaper than Tesla, but there’s less growth in store for them. This is how the P/E ratios haven’t changed much in the last few years:
That may be the most stable thing about the car market right now.