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Analyst estimates give us a fairly good idea about how a company is expected to perform in the upcoming quarter. When these estimates are raised or lowered, there is a response from the investment community to buy or sell shares.
The positive correlation between estimate revisions and share prices is particularly visible when estimates are raised. In fact, our analysis of historical data shows that it is generally a good idea to accumulate shares of companies that are seeing positive estimate revisions because these are almost always followed by appreciation in share prices over the next month or so.
But these estimates are the result of deeper analysis of a company’s financials, including its revenue sources, geographical reach, expense heads and so many other things. Taking stock of these details would tell us what is driving the revision in revenue or earnings expectations. And this would help us understand the stock all the better. Good investing is about doing your homework, which is what we will do today with a deep-dive into Tesla (TSLA - Free Report) -
Digging Into the Numbers
Tesla is an auto maker that remains significantly impacted by supply chain issues, which has impacted its ability to source key components, mainly chips. Tesla expects supply chain issues to persist through 2022, limiting its unit sales this year.
Despite these issues, its automotive revenues, which are 90% of total revenues, have in the recent past, managed to beat expectations. Total automotive revenue in the fourth quarter of 2021 came in at $15.97 billion, which beat analyst estimates by 13.2%. This was a much better showing than in the third, second and first quarter of 2021, when auto revenue beat estimates by a respective 4.0%, 2.3% and 0.1%.
Around 96% of auto revenue comes from vehicle sales and this segment surprised by 11.7%. In the three preceding quarters, vehicle sales surprised by a respective 3.2%, 2.3% and 3.1%.
In the last quarter, auto leasing revenue came in much better than expected, surprising by 67.1%, which raised total auto revenue a couple of points.
Auto regulatory credits continued to disappoint.
As usual, total vehicle production met estimates in the last quarter. But deliveries surprised by 9.1%. This was much better than the 4.7%, -0.8% and 3.7% surprises in the three preceding quarters.
Around 95% of vehicle production and 96% of vehicle deliveries in the last quarter came from the Model 3/Y. Total deliveries of Model 3/Y beat analyst estimates by 11.7%, much better than the 5.9%, 1.3% and 5.0% beats in the three preceding quarters.
Model S/X deliveries beat analyst estimates by 15.6%, which was better than the negative surprises of 10% and 39% in the two preceding quarters and the 0.8% positive surprise in the quarter before that.
Final Words
Tesla stock currently carries a Zacks Rank #1 (Strong Buy), which is a big deal considering the fact that most automakers (certainly the traditional ones) are not particularly attractive right now. While Blue Bird Corp (BLBD - Free Report) , Harley Davidson, Inc (HOG - Free Report) and Nikola (NKLA - Free Report) Corp are a few buy-ranked stocks in the group that Zacks classifies as Automotive – Domestic, the industry rank of 171 (bottom 32%) of 250+ such industries is indicative of the concerns facing the industry right now.
Tesla’s strength is likely related to the recent uptick in its deliveries, which seems to suggest that it is doing a better job of sourcing than some of its peers. The fact that it is an EV pureplay also helps on the cost front. Additionally, Tesla promises to generate certain future revenues from software (it is regarded as half a tech company after all), which also sets it apart to an extent.
One-Month Price Movement
Image Source: Zacks Investment Research
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Tesla Deliveries Are Finally Beating Expectations
Analyst estimates give us a fairly good idea about how a company is expected to perform in the upcoming quarter. When these estimates are raised or lowered, there is a response from the investment community to buy or sell shares.
The positive correlation between estimate revisions and share prices is particularly visible when estimates are raised. In fact, our analysis of historical data shows that it is generally a good idea to accumulate shares of companies that are seeing positive estimate revisions because these are almost always followed by appreciation in share prices over the next month or so.
But these estimates are the result of deeper analysis of a company’s financials, including its revenue sources, geographical reach, expense heads and so many other things. Taking stock of these details would tell us what is driving the revision in revenue or earnings expectations. And this would help us understand the stock all the better. Good investing is about doing your homework, which is what we will do today with a deep-dive into Tesla (TSLA - Free Report) -
Digging Into the Numbers
Tesla is an auto maker that remains significantly impacted by supply chain issues, which has impacted its ability to source key components, mainly chips. Tesla expects supply chain issues to persist through 2022, limiting its unit sales this year.
Despite these issues, its automotive revenues, which are 90% of total revenues, have in the recent past, managed to beat expectations. Total automotive revenue in the fourth quarter of 2021 came in at $15.97 billion, which beat analyst estimates by 13.2%. This was a much better showing than in the third, second and first quarter of 2021, when auto revenue beat estimates by a respective 4.0%, 2.3% and 0.1%.
Around 96% of auto revenue comes from vehicle sales and this segment surprised by 11.7%. In the three preceding quarters, vehicle sales surprised by a respective 3.2%, 2.3% and 3.1%.
In the last quarter, auto leasing revenue came in much better than expected, surprising by 67.1%, which raised total auto revenue a couple of points.
Auto regulatory credits continued to disappoint.
As usual, total vehicle production met estimates in the last quarter. But deliveries surprised by 9.1%. This was much better than the 4.7%, -0.8% and 3.7% surprises in the three preceding quarters.
Around 95% of vehicle production and 96% of vehicle deliveries in the last quarter came from the Model 3/Y. Total deliveries of Model 3/Y beat analyst estimates by 11.7%, much better than the 5.9%, 1.3% and 5.0% beats in the three preceding quarters.
Model S/X deliveries beat analyst estimates by 15.6%, which was better than the negative surprises of 10% and 39% in the two preceding quarters and the 0.8% positive surprise in the quarter before that.
Final Words
Tesla stock currently carries a Zacks Rank #1 (Strong Buy), which is a big deal considering the fact that most automakers (certainly the traditional ones) are not particularly attractive right now. While Blue Bird Corp (BLBD - Free Report) , Harley Davidson, Inc (HOG - Free Report) and Nikola (NKLA - Free Report) Corp are a few buy-ranked stocks in the group that Zacks classifies as Automotive – Domestic, the industry rank of 171 (bottom 32%) of 250+ such industries is indicative of the concerns facing the industry right now.
Tesla’s strength is likely related to the recent uptick in its deliveries, which seems to suggest that it is doing a better job of sourcing than some of its peers. The fact that it is an EV pureplay also helps on the cost front. Additionally, Tesla promises to generate certain future revenues from software (it is regarded as half a tech company after all), which also sets it apart to an extent.
One-Month Price Movement
Image Source: Zacks Investment Research