Tesla: Analysts Whiff Again

Summary

• Q4 deliveries beat unrealistically low estimates.
• Revenue estimates will rise until Q4 report.
• Berlin and Austin should open up soon.

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On Sunday, we received the Q4 2021 production and delivery report from electric vehicle maker Tesla (NASDAQ:TSLA). The company was expected to finish the year strong, primarily thanks to the Shanghai factory ramp. Tesla did just that, coming in with its best quarter ever, while also proving that wall street analyst estimates may not be worth watching anymore.

As a reminder, Tesla produced almost 238,000 vehicles in Q3 2021 and delivered more than 241,000. Q4 is usually a better quarter seasonally, and it helps that some demand can be pulled forward thanks to tax breaks in certain countries ending or reducing when the new year starts. In the graphic below, you can see the quarterly records that Tesla achieved.

(Source: Tesla Q4 2021 release, seen here)

It was certainly not a surprise that Tesla beat analyst estimates, considering how low they really were. As a reminder, the Shanghai factory averaged a little over 56,000 sales a month in October and November. Even if you assumed no step up in December, another month at that rate would put that factory at production of nearly 170,000 units for Q4, and Fremont has reportedly been over 108,000 units a quarter recently with an installed annual capacity of 150,000 units per quarter. Thus, when I saw the below Tesla IR compiled estimates figure released last week calling for less than 266,000 deliveries, I knew a large beat was coming.

(Source: Gary Black Twitter, seen here)

As a reminder, I was calling for more than 294,000 deliveries in Q4, and I was about $1.2 billion above the average street revenue estimate prior to the Q4 figures being released. Going into the delivery report, there was even one analyst expecting Q4 revenues to be more than $350 million below what Tesla reported in Q3. Thus, we are likely to see the average revenue estimate rise quite a bit in the next few weeks, although I still think the street will leave enough room for Tesla to beat yet again. Currently, I'm calling for a little more than $17 billion in total Q4 revenue, while the street isn't much over $15 billion at this point. My estimates may change slightly depending on the geographic sales mix and potential vehicle variant mix we get data on over the next couple of weeks.

Late last week, we also got some interesting news out of China. The company raised the price of its base Model 3 and Model Y vehicles by 10,000 Yuan, or about $1,575. While that doesn't seem like much, the new price on the Model Y makes it no longer eligible for subsidies as it is now over the 300,000 price limit. Thus, the effective starting price of the base Model Y for 2022 has gone from 280,752 (the previous estimated 2022 price post-subsidy as the subsidy hadn't been finalized yet) to 301,840 Yuan. That's an increase of about 7.5%, or more than $3,300.

Don't forget that under the previous price, a consumer could still order a different color vehicle exterior or interior and still be under the subsidy limit, so the number of add-ons Tesla sells might also decrease. China is also planning to completely eliminate EV incentives in 2023, which would make the base Model 3 even more expensive without any other price movement. There will be some bears out there that argue that Tesla pulled forward a little demand into 2021 thanks to the potential subsidy reduction, so it will be interesting to watch China sales in the coming months.

Looking forward to this year, it's obviously that street analysts continue to be well off the mark. Annualizing the Q4 2021 result would put us over 1.23 million vehicles, with no additional progress from Shanghai and zero contributions from the two new factories. As the above graphic showed, the street wasn't even at 1.265 million vehicles from current models, and Tesla's 50% long term growth rate goal would mean a little over 1.4 million deliveries for this year. Investors are currently waiting for news on factory openings in Berlin and Austin, along with a product roadmap update at the Q4 report.

As of Sunday, the average street price target was $893. With Tesla beating handily, that number is sure to go up, but let's focus on this year. If you think the company will beat the above analyst delivery forecast by say 10%-15%, adding that amount to the current average price target gives you a price range of $983 to $1,027. Tesla shares closed $30 above the top end of that on Friday, but you're likely to see a pop on Monday.

In the end, Tesla announced a very strong Q4, topping 300,000 quarterly deliveries for the first time. A large beat was extremely likely because the street was so ridiculously low, putting into question whether we should even bother with analyst estimates moving forward. The Shanghai factory has clearly ramped production quite well, and Tesla has two new facilities opening in the coming months. The growth story is certainly intact here, with the ongoing question for investors remaining what is the stock itself actually worth in the long run. For now, the Q4 production and delivery report gives more ammunition to the bull camp.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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