Tesla Inc. on Wednesday posted record third-quarter revenue but still missed Wall Street estimates as the electric carmaker led by billionaire Elon Musk delivered fewer vehicles than expected, while spending on new factories and new battery production squeezed margins.
(For insights on emerging themes at the intersection of technology, business and policy, subscribe to our tech newsletter Today’s Cache.)
Chief Executive Musk told analysts on a conference call there was excellent demand for the fourth quarter, addressing investor concern that buyers could be discouraged by the weak global economy and high prices for Tesla vehicles. But executives said some delivery issues would persist, with fourth-quarter deliveries tracking under 50% growth while production hit 50% growth.
Shares fell 4.3% in after-market trading.
Tesla is expanding fast despite global economic jitters, and investors are closely watching for signs that the cooling economy would hurt demand.
The company's third-quarter automotive gross margin was 27.9%, missing analysts' estimates, and is down from 30.5% a year earlier.
Tesla's revenue for the third quarter was $21.45 billion - a record, but short of analysts' estimates of $21.96 billion, according to IBES data from Refinitiv.
The company said it had a negative foreign exchange impact of $250 million on its earnings, as the U.S. dollar strengthened against major currencies.
"Raw material cost inflation impacted our profitability along with ramp inefficiencies" from its new factories in Berlin and Texas, and the production of its new 4680 batteries, according to Tesla's statement.
"Logistics volatility and supply chain bottlenecks remain immediate challenges, although improving," Tesla said.
Musk added that production of the new battery, known as 4680, was gaining rapid traction.
Musk also said that it made sense to do a stock buyback in the range of $5 billion to $10 billion, pending board review and approval.
Demand
Tesla achieved record quarterly deliveries largely thanks to its ramp-up in China. But the electric vehicle pioneer has seen its shares tumble about 50% from record highs last November as investors were spooked by a cooling global economy and Musk's bid to buy social media company Twitter.
Musk told the conference call he saw a path for Tesla to be worth more than two mammoth companies, Apple Inc. and Saudi Aramco, combined. Tesla's market cap is now under $700 billion, while Apple is worth $2.3 trillion and oil producer Saudi Aramco is worth $2.1 trillion.
Analysts had expected Musk to voice optimism about Tesla in the conference call. Musk has been trying to raise cash to fund his $44 billion deal to take Twitter Inc. private. Some experts say Musk may need to sell about $3 billion more in stock after the earnings announcement to help fund the deal.
Early this month, Tesla said it delivered 35% more vehicles in the July-September period than in the previous quarter, but the number was shy of vehicle production and analysts' estimates.
Tesla blamed challenges transporting vehicles, but some analysts were also concerned that demand may have softened.
Musk also said that Tesla's Cybertruck pick-up truck was on track to enter production in the middle of next year and that its heavy duty semi truck, which will begin deliveries later this year, could see 50,000 units next year.
