- Q3 revenues rise 56% but still narrowly miss forecasts
- Finance chief tapers 50% deliveries growth target in 2022
- Up to $10 billion buyback on cards after 44% stock slump
Chief executive Elon Musk has hinted that Tesla could buy back up to $10 billion worth of its own stock, but investors remain concerned about growth.
Overnight, Tesla shares lost nearly 6% as the markets homed in on a third-quarter revenue miss and the company’s finance chief back-tracked on full year growth targets.
Tesla shares are expected to trade $12.34 lower when Wall Street reopens later today, at $209.70.
GROWTH TARGET LOWERED
Tesla delivered a record number of cars in Q3, but still missed analysts’ expectations, as Shares warned it might last week, and made it more difficult to hit executives’ target for the year of an increase of more than 50% in vehicle deliveries.
While Musk tried to brush off concerns about rising competition, falling demand from a weakening global economy and stubbornly resistant supply chain snarl-ups, Tesla’s chief financial officer Zachary Kirkhorn said ‘we do expect to be just under 50% growth [for deliveries] due to an increase in the cars in transit at the end of the year.’
Kirkhorn said that the company will increase production of cars by 50%, ‘although we are tracking supply-chain risks which are beyond our control.’
Q3 revenue rose 56% to $21.45 billion, below the $22.5 billion consensus forecast, according to Investing.com data, although earnings narrowly beat estimates. Earnings per share was $1.05 versus $1.03 expected.
Gross profit rose 47% but margins fell on supply bottlenecks and rising input costs. Musk stressed there is still ‘excellent demand’ for cars but warned of recessionary forces in Europe and China.
IS $10 BILLION BUYBACK TACTICAL
According to reports, some Tesla investors have been agitating for a stock buyback after multiple stock splits and the company losing more than a third of its market capitalisation in 2022. Cynics will claim Musk is using that to his advantage after suggesting that Tesla’s board has discussed a buyback in the range of $5 billion to $10 billion.
Shares read: Why do companies buy their own shares and does it add value?
‘We debated the buyback idea extensively at board level,’ the billionaire entrepreneur said on a conference call. ‘The board generally thinks that it makes sense to do a buyback, we want to work through the right process to do a buyback, but it is something possible for us to do a buyback on the order of $5 billion to $10 billion even in a downside scenario next year, given next year is very difficult,’ he said, adding that it ‘is obviously pending board review and approval.’
‘So it’s likely that we will do some meaningful buyback,’ he concluded.
HOW HAS TESLA STOCK PERFORMED?
Tesla shares remain hugely popular with many retail investors, but they have fallen more than 44% so far this year, a deeper decline than both the S&P 500 (down 23%) or the Nasdaq Composite’s 32.5% slump.
It is widely believed that a variety of reasons are responsible for the steep stock slide this year, including increasing competition in the EV market, negative press around Tesla’s full-self-driving claims and actual performance, and Musk’s attention being diverted to his litigious and protracted acquisition of social media platform Twitter (TWTR:NYSE).
