Tesla (TSLA) shares edged lower Wednesday ahead of the clean-energy carmaker's first quarter earnings after the close of trading with investors focused on the group's profit margins following record deliveries and rising input costs.
Tesla's main Shanghai factory has been closed for several weeks amid China's ongoing Covid surge, and is only now getting back to its full output capacity, while rising costs for everything from battery components to shipping rates is likely to trim automotive margins over the three months ending in March, although series of Tesla price hikes may help mitigate some of those input cost increases.
"While we think price increases will help to blunt the impact of cost inflation in 2022, we nevertheless expect a net negative, especially given the timing lag of price increases," said Credit Suisse analyst Dan Levy, who has a $1,125 price target with an 'outperform' rating on Tesla.
"We believe the stock may trade near-term on margin dynamics – to the extent raw materials dent the margin story beyond expectations, the stock could be negatively impacted," he added.
Tesla shares were marked 4.8% lower in late afternoon trading Wednesday to change hands at $979.80 each, a move that would leave the stock down around 18.3% for the year.
Tesla, which relies on both China sales and production of its Shanghai gigafactory ahead of ramp-ups at new production facilities in Berlin and Austin, produced 55,462 units in March, compared to 55,308 in the Lunar New Year-shortened month of February and 68,117 to start the year in January.
Production actually fell, however, to 305,407 vehicles compared to the 305,840 tally recorded over the final three months of last year, thanks in part to supply chain disruptions and Covid-related closures at its Shanghai factory.
Globally, Tesla delivered 310,048 new cars over the three months ending in March, up 67.8% from last year but just 0.5% higher than the 308,600 reached in the final three months of last year.
Analysts are looking for Tesla to post a bottom line of $2.26 per share on record revenues of $17.76 billion, but the impact of the Shanghai closure, delays in getting its Berlin factory online and slumping China demand will very likely weigh on the group's second quarter outlook, as well as its full-year delivery estimate of around 1.47 million vehicles.
Another earnings call wild-card might include comments from CEO Elon Musk on the investor conference call at 5:30 pm Eastern time.
Musk, who stopped attending the event on a regular basis in 2020, is fully in the throes of a $43 billion hostile bid for Twitter (TWTR), which he has hinted could include a tender offer to shareholders at $54.20 each if the board fails to endorse his unsolicited approach.
After Tweeting the words "Love me Tender" to his 81 million followers last week, Musk again alluded to the word 'tender' in a Tweet channeling F. Scott Fitzgerald's 1934 novel 'Tender is the Night'.
The New York Post reported Tuesday that Musk is prepared to put up between $10 billion and $15 billion of his estimated $300 billion fortune to buy Twitter, which he has said is worth $54.20 per share, but is facing difficulty in convincing other investment partners to fund his acquisition.
Earlier media reports suggested that Apollo Global Management has expressed willingness to use its credit investment platform to support any move to buy the micro-blogging website, including Musk's unsolicited $43 billion take-private proposal.
It must also be noted that today's date -- 4/20 -- represents a well-established theme in the world of marijuana legislation, and has been used as a reference by Musk himself on several occasions, both in his current bid for Twitter and his ill-fated Tweet in 2018 that suggested he could take Tesla private a price of $420 per share with "funding secured".
