Tesla reported better-than-expected first-quarter earnings late Wednesday, as the EV maker slowly reopens its Shanghai factory, which was shut down for three weeks due to a spike in Covid-19 cases in China. Tesla stock jumped on Thursday.
"While weekly production rates were strong in Q1, a spike in COVID-19 cases in Shanghai resulted in the temporary shutdown of our factory as well as parts of our supply chain," management said in its earnings presentation deck. "Although limited production has recently restarted, we continue to monitor the situation closely."
Tesla's factory in China was closed since March 28. The company on Tuesday restarted production in a "closed loop management" process, according to Bloomberg, citing local reports. That means that the reportedly 8,000 Tesla workers recalled to the factory would have to live on site. Production is likely to be limited at first. It could be mid-May or later before Tesla Shanghai returns to pre-shutdown output levels.
The Shanghai plant was closed for six days in March, but the bigger impact will be felt in the second quarter.
Nevertheless, CEO Elon Musk is optimistic output will rebound. In an earnings call with investors, Musk said he expected Q2 production would be similar to Q1, maybe slightly lower.
"We might be able to pull a rabbit out of the hat and be slightly higher," he added.
However, CFO Zach Kirkhorn said Tesla lost about a month of volume in Shanghai and that "this will impact volume in Q2."
Tesla Earnings
Estimates: Tesla earnings per share were expected to more than double vs. a year earlier to $2.26, according to FactSet analysts. Sales were seen surging 69% to $17.595 billion.
Results: Tesla earnings per share vaulted 246% to $3.22 with sales up 81% to $18.76 billion. That's the second straight quarter of accelerating growth for both. That includes $679 million from regulatory credits, more than doubling from Q4 2021.
Tesla previously reported that first-quarter deliveries reached 310,048 vehicles, up 68% vs. a year earlier but just above Q4 levels. That was roughly in line with views.
Wedbush's Ives said the Q1 deliveries were "better than feared," given the persistent chip shortage affecting all automakers as well as supply-chain bottlenecks.
FactSet estimates Tesla is on track to deliver 1.494 million vehicles by the end of 2022, but it's unclear how much analysts have factored in Tesla Shanghai production losses.
Tesla opened its Berlin plant in March and its Austin factory on April 7. Giga Berlin is reportedly producing just 350 vehicles per week right now. It hopes to ramp up production to about 1,000 electric vehicles per week by the end of the month and up to 10,000 per week by year end, according to Electrek, citing local reports.
The Berlin factory remains reliant on batteries and some other parts from China. It's unclear what effects the Tesla Shanghai plant's closure, or broader Shanghai shutdown and logistical issues, might be having on Berlin.
Management said multiple headwinds persist.
"In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations," the company said. "Furthermore, prices of some raw materials have increased multiple-fold in recent months. The inflationary impact on our cost structure has contributed to adjustments in our product pricing, despite a continued focus on reducing our manufacturing costs where possible."
Musk reiterated that he hoped Cybertruck production would begin next year.
Tesla Vs. BYD: Which Booming EV Giant Is The Better Buy?
Tesla Stock
Shares jumped 3.2% to 1,008.47 on the stock market today. Tesla stock has a 1,152.97 cup-with-handle buy point, according to MarketSmith chart analysis.
The Leaderboard stock has rebounded after hitting a low of $700 in February, with most of the gains coming from mid-March to early April.
Tesla's relative strength line has slipped in recent days, but is still near all-time highs. Its RS Rating is 90 out of a best-possible 99, while its EPS Rating is 76.
Among Tesla's U.S.-based rivals, Rivian was tumbled 6.6%, while Lucid sank 6.5%. Among legacy automakers pivoting to offer EVs, General Motors fell 2.2% and Ford lost 2%.
As for Tesla's China-based rivals, BYD retreated 3.1%, Nio fell 5.2%, Li Auto lost 2% and XPeng declined 4%.
Musk's Twitter Bid
Meanwhile, Musk's $43 billion takeover attempt of Twitter is also top of mind among Tesla investors, but did not come up during the earnings call.
"There will be host of questions around financing, regulatory, balancing Musk's time (Tesla, SpaceX) in the coming days," wrote Wedbush analyst Daniel Ives in a recent note to clients.
Last Friday, Twitter adopted a "poison pill" plan to fend off Musk's hostile takeover attempt. Musk is Twitter's largest shareholder with a 9.1% share. A successful takeover bid could spur Musk to sell more Tesla stock.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
