Tesla Motors (NASDAQ:TSLA) reported its earnings last night. Revenues were up 81% compared to the same period a year ago and net income increased 658% on the same basis.
Despite this, Tesla shares advanced just 7% on the news — mostly undoing a 5% decline from earlier in the day. The company handily outperformed Wall Street’s expectations, so does a muted response mean that the hype is over for Tesla shares?
Excellent earnings
By just about any metric, Tesla’s earnings report was impressive. The company announced production in new factories in Berlin and Texas. The result was a record 310,000 vehicles delivered during the first quarter of 2022.
This is good, given the challenges that Tesla has been facing. Production at the company’s Shanghai factory was limited by lockdowns in the last quarter and chip shortages have also been disrupting supply chains in the industry more broadly.
Looking forward, the company anticipates growing its rate of vehicle deliveries at 50% for a number of years. I think that this is also encouraging, since it should bring with it further margin expansion.
To my mind, the result is impressive on just about every count. The question that this raises, for me, is why Tesla shares haven’t pushed even higher. As I said, it might be that some of the hype is starting to come out of the company’s stock.
Tesla shares
But it’s not just that. One reason that Tesla shares haven’t surged after the earnings report is that the deliveries number came in below estimates. While 310,000 is a record and is good, in my view, it falls short of the expectations that analysts had before the start of the quarter.
Another issue weighing on Tesla’s share price is its valuation. The earnings result takes its earnings per share (EPS) from $4.90 to $9.07. But with a share price close to $1,000, even $9.07 in earnings still amounts to an investment return of less than 1%.
Tesla shareholders will no doubt be hoping that earnings can continue to grow rapidly. The growth in EPS amounts to an 85% increase. If the company can continue to grow its earnings at that rate, then a decent investment return will come one day. But there’s still a long way to go.
I also think it’s significant that the Tesla truck and its autonomous vehicle remain in the future. Company chief Elon Musk has been forecasting the advent of autonomous taxis for some time, but this has been delayed again and again and I suspect that the market might be putting less faith in his continued promises.
Conclusion
To my mind, Tesla has had an extremely impressive quarter. I think that its shares deserve to be significantly higher than they were a day ago on the back of the numbers it reported.
The company doesn’t traditionally fit the kind of profile that I look for in an investment, so I don’t anticipate buying shares for my own portfolio any time soon. But I am warming to it. I think Tesla shares today have more tangible value and less hype around them than they had a day ago, which makes them more attractive to me. They’ll stay on my watchlist.