Daily Brief - Tesla crushes expectations … again (Jan 3, 2022)

Nothing says “Happy New Year!” to a Tesla (stock) owner like the latest deliveries report from the company.

Wall Street wanted about 275,000 delivered cars for Q4 of 2021, a tall order and almost 60% more than this time in 2020. In fact, the highest estimate as recorded by FactSet was as high as 292,000.

In the end, Tesla delivered a scarcely believable 308,600 vehicles. For all of 2021, deliveries came in at around 936,000. That’s an increase of 87% compared with the 500,000 units or so delivered in 2020.

2020 example bodes well for the stock

History suggests a good period ahead for Tesla. Strong deliveries have typically led to strong stock performance for the period between reporting deliveries and reporting earnings. In fact, Tesla stock has outperformed the overall market in seven of the past nine periods between delivery results and financial results.

In 2020, the stock gained just over 20% from January 2, after Tesla similarly reported a very strong beat of fourth quarter 2020 delivery expectations, to January 27 when the earnings announcement came out.

And what does the future look like?

Tesla is far better positioned for the chip shortage

Much of the auto industry has struggled with massive chip shortages since the pandemic began, dramatically curtailing their production. Except Tesla. What’s going on? Tesla, as a still relatively young car company, had the advantage of designing its vehicles from the ground-up, rather than adding parts in a piecemeal fashion over decades as many legacy auto makers have done. That allowed Tesla to consolidate systems, and rely on fewer chips per each car.

More manufacturing plants coming in 2022

Early in 2022, Tesla is set to start up two more assembly facilities. One in Austin, Texas, and the other near Berlin, Germany. The existing two plants - Fremont and Shanghai - are already producing at an annual rate of 1.2 million units. Adding two more, even with the ramp up time, will increase the capacity - and expectations - considerably.

In a nutshell, Tesla is going from Ludicrous to Ludicrous Plus mode.

Ps. Happy New year to our Daily Brief readers. We hope to bring you many exciting (and actionable) daily notes in 2022, spanning a wide range of topics from macro to micro.