Tesla released its Q3 2022 results this week, which sent the share price down 6% in the following day’s trading.
To understand why the market reacted negatively to the update, you need to delve into the latest results.
The electric vehicle manufacturer increased its revenue by 56% from $13.76 billion in Q3 2021 to $21.45 billion in Q3 2022.
Tesla also increased its net income by 75% from $2.09 billion in Q3 2021 to $3.65 billion in Q3 2022.
Although the results were positive, they missed analysts’ expectations. The consensus view was that Tesla would generate revenue of $21.96 billion, marginally higher than what was reported.
Tesla managed to beat analysts’ expectations regarding its earnings per share (EPS) at $1.05 per share compared to the estimated $0.99 per share.
Tesla also beat expectations in leasings, energy, and services but missed expectations in sales and regulatory credits.
The misses grabbed investors’ attention, and Tesla’s lofty valuation caused the share price to crash.
During its earnings call, Tesla CEO Elon Musk said the demand for Tesla vehicles looks very strong for the next quarter, and the company expects to set a record-breaking year.
Tesla expects to continue selling every vehicle it produces, and there is still a large opportunity for the company to increase its footprint.
The chart below shows Tesla’s vehicle production compared to its vehicle sales, and it shows that the vehicle manufacturer has strong demand that matches its increase in production.
Over the past few years, Tesla strongly focused on increasing its production capabilities and overall footprint with its three most recent Gigafactories in China, Texas, and Berlin.
Elon Musk said that Tesla’s Gigafactory Berlin hit a new milestone of producing 2,000 vehicles per week. He added that Gigafactory Texas would reach this same milestone very soon.
Musk said he remains extremely positive about Tesla’s future and made the bold statement that Tesla could become worth more than Apple and Saudi Aramco combined.
Tesla achieved good results, but there are big expectations baked into the share price. Any deviations from expectations could cause large deviations in its price. It makes the share highly risky.
The company has grown to a market cap of $700 billion under Musk’s leadership, but only time will tell if this exceptional growth can continue.