27 April 2021

Tesla Shares Stall Despite Stellar Q1 Results

Tags

News shaping
the markets today

     

What’s happening: Shares of Tesla fell in extended trading on Monday, despite the electric vehicle maker reporting record profits for the first quarter.

What happened: Tesla reported all-time high deliveries for the first quarter despite facing severe chip shortage, which has been plaguing the auto sector globally since the beginning of the year.

Tesla recorded profits for the seventh consecutive quarter, although its bottom-line was mostly driven by environmental credits. The company also made an announcement related to its Bitcoin investment during the earnings call.

How were the results: The EV maker reported strong growth in sales and profits for the first quarter, with both metrics topping market expectations.

  • Revenues grew $10.39 billion in the first quarter, from $5.99 billion in the same quarter last year. The figure surpassed Street expectations of $10.29 billion.
  • Adjusted profits more than quadrupled to 93 cents per share, handsomely exceeding the consensus estimate of 79 cents per share.

Why it matters: Tesla and other automakers have been facing a severe shortage in the supply of chips and other materials, which threatens their plans of ramping up production to meet the recovery in demand.

Tesla delivered over a half million vehicles in 2020 and reported another 184,800 deliveries globally for the first quarter. The EV maker achieved 109% year-on-year growth in deliveries, despite the quarter being “one of the most difficult supply chain challenges that we’d ever experienced,” CEO Elon Musk said. Management projected volume growth of more than 50% this year.

Apart from the chip shortage, Tesla is facing another challenge. Competition for its vehicles is rising, with new models being launched by peers like Amazon-backed Rivian Automotive and established automakers like General Motors and Volkswagen.

Investors were also concerned about Tesla’s profits being driven by the sale of regulatory credits in the latest quarter, which climbed to $518 million, from $401 million in the year-ago quarter.

Markets were also keen to hear about the company’s Bitcoin investments. Management said during the earnings call that the sale of 10% of its holdings of the cryptocurrency had generated a profit of $101 million.

Earlier this year, Tesla had disclosed its investment in Bitcoin and announced plans to accept it as a source of payment. The announcement had led to a sharp rally in the digital asset. During the first-quarter earnings call, CFO Zachary Kirkhorn said, “It is our intent to hold what we have long-term and continue to accumulate Bitcoin from transactions from our customers as they purchase vehicles.”

How shares responded: Tesla's shares plummeted 2.5% to $719.85 in after-hours trading on Monday following the release of quarterly results. The stock has maintained a downtrend this year, after its valuation shot up eight-fold in 2020.

What to watch: Investors will keep an eye on the supply of chips and other materials and Tesla’s progress in ramping production. Markets will also monitor the company’s Bitcoin investment, given the sharp volatility in crypto prices.

The Markets Today

     

US stocks will be in focus today ahead of a basket of earnings and economic reports.

Context: Wall Street closed mixed on Monday with investors awaiting one of the busiest weeks of the current earnings season.

Details: US stocks came under pressure last week on concerns over President Joe Biden’s proposal of a hike in capital gains tax on wealthy individuals. The S&P 500 closed 0.13% lower last week, putting an end to a four-week winning streak.

Around a third of S&P 500 companies are set to report their quarterly results this week. This includes several major companies. Some of the biggest technology firms that have their earnings calls scheduled for this week include Apple, Amazon, Microsoft, and Alphabet.

Most companies have exceeded market expectations so far this earnings season. Among the 25% S&P 500 firms that have reported results so far, about 84% have topped earnings expectations.

“Growth is still improving and liquidity is still abundant,” Morgan Stanley analyst Andrew Sheets said in a note. He added, “The bull market remains intact, and I struggle to see the type of calamity that defined the summers of 2010, 2011, 2012 and 2015. But a harder, choppier, more range-bound summer does seem likely.”

On the economic data front, durable goods orders rose 0.5% last month, missing the consensus estimate of 2.5% growth.

The Dow Jones index lost around 62 points to settle at 33,981.57 on Monday, dragged down by the stocks of Coca Cola and Procter & Gamble. Consumer staples stocks led the plunge, shedding around 1% in the session.

The S&P 500 inched 0.18% higher to close at 4,187.62 on Monday, while the Nasdaq 100 climbed 0.61% to 14,026.16.

What to watch: Investors await data on S&P CoreLogic Case-Shiller home price index, FHFA house price index, Conference Board’s consumer confidence index and Richmond Fed manufacturing activity index.

The S&P CoreLogic Case-Shiller 20-city home price index, which surged 11.1% in January, is expected to rise 11.7% in February. The Conference Board’s consumer confidence index is projected to improve to 113 in April, from a reading of 109.7 in March.

Markets will also keep an eye on the Federal Reserve’s meeting, scheduled for Tuesday and Wednesday.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 148 million.

Other Markets: European trading indices closed higher on Monday, with the FTSE 100, German DAX 30, French 40 and STOXX Europe 600 up by 0.35%, 0.11%, 0.28% and 0.26%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Italy’s consumer confidence index and manufacturing confidence index, France’s initial jobless claims and unemployed persons, UK’s CBI distributive trades survey’s retail sales balance, Mexico's balance of trade, Russia’s business confidence as well as the US Redbook index and API’s crude oil stockpiles.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.