Elon Musk teases massive Tesla share buyback as CFO cuts forecast for annual deliveries and falling stock.


Tesla Inc. Chief Executive Officer Elon Musk suggested on Wednesday that he may buy back $10 billion worth of shares in the electric car maker, as shares fell after a third-quarter revenue loss and as the CFO lowered full-year delivery expectations.

Some Tesla TSLA,
+0.84%
investors have been clamoring for share buybacks after several stock splits and the company losing more than a third of its market capitalization in 2022, and Musk said on an earnings conference call that Tesla’s board was discussing a buyback of $5 billion to $10 billion. billion.

“We discussed the buyback idea extensively at the board level. The board thinks it makes sense to buy back in general, we want to work on the right process for buying back, but buying back with a $5 order is something that is possible for us. [billion] “Getting to $10 billion next year even in a negative scenario is very difficult given next year,” he said, “obviously pending board review and approval.”

“So it’s likely we’ll do some meaningful buybacks,” he said.

The statement didn’t immediately move Tesla shares, as was predicted by Chief Financial Officer Zachary Kirkhorn, who said: “We expect a little under 50% growth. [for deliveries] it is related to the increase of cars in transit at the end of the year”.

Tesla delivered a record number of cars in the third quarter, but still missed analysts’ expectations, making it difficult to meet executives’ goal of more than 50% growth in vehicle shipments for the year. Kirkhorn said the company would increase vehicle production by 50%, “although we are monitoring supply chain risks that are beyond our control.”

Shares fell between 3% and 5% after the car company’s earnings report. Tesla reported third-quarter profit of $3.29 billion, or 95 cents per share, on sales of $21.45 billion, up from $13.76 billion a year earlier. After adjusting for stock-based compensation, the electric car maker reported earnings of $1.05 a share, up from 62 cents a year ago.

Analysts on average had expected adjusted earnings of $1 per share on sales of $21.98 billion, according to FactSet. Tesla shares fell nearly 5% in after-hours trading immediately after the results, after closing up 0.8% to $222.04 in the regular trading session.

Tesla shares have fallen more than 37% so far this year, a steeper decline than the S&P 500 SPX’s 22% decline.
-0.67%,
after years of huge profits. Experts say increased competition in the EV market, negative press surrounding Tesla’s claims of full self-driving and actual performance, and Musk’s focus on Twitter Inc.
+0.10%.

Don’t miss: Electric vehicles are expected to nearly double their market share

However, none of this got Musk more stubborn. It is Tesla’s two most valuable companies in the world, Apple Inc. It predicted it would be worth as much as AAPL.
+0.08%
and Saudi Arabian Oil Co. 2222,
+1.14%,
combined. The market capitalization of both companies exceeded 2 trillion dollars.

“Now I think we can far surpass Apple’s current market,” Musk said, after referring to an earlier prediction that Tesla would reach Apple’s then-record market cap. “In fact, I see a potential way for Tesla to become more valuable than Apple and Saudi Aramco. This is not to say that it will happen or be easy, in fact it will be very difficult, it will require a lot of work, a lot of creative new products, expansion and good luck always. But this is the first time I see a way for Tesla to be nearly twice the value of Saudi Aramco.”

In a preview of the report on Tuesday, Wedbush Securities analyst Daniel Ives said, “The Street is starting to worry that the rose bloom in the Tesla story is coming out with delivery shortfalls front and center.”

“Between logistics issues in China, supply chain issues, FSD black eyes, the growing Musk Twitter fiasco around the world, and EV competition, there’s increasing pressure on Musk & Co. to prove themselves,” Ives said.

Despite what Musk called “embarrassing” price increases, Tesla’s vehicle gross margin was 27.9% sequentially, declining in the second quarter. Operating margin increased both sequentially and year-over-year, but rose to 17.2% from 14.6% in both the year-ago third quarter and the prior-year quarter.

Earnings Review: Are Tesla’s Record Deliveries Masking Demand Trouble?

In a call with investors on Wednesday, Tesla executives announced that they will change the process for shipping cars, one of the most difficult jobs in recent memory, in hopes of cutting costs.

“In the last weeks of each quarter, we reach such significant delivery volumes that carrying capacity becomes expensive and difficult to secure. As a result, we began to transition to a smoother delivery pace that led to more cars in transit at the end of the quarter,” the company’s shareholders said. “We expect that the smoothing of our logistics going forward during the quarter will improve our cost per vehicle.”



Source link