Tesla Inc.

Tesla, Inc. (NASDAQ: TSLA) designs, develops, manufactures, sells and leases fully electric vehicles and energy generation and storage systems, and offer services related to its products. The Company's automotive segment includes the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits.

Recent Financial and Business Updates:

• Revenue Growth: In the third quarter of the fiscal year, the company achieved a year-over-year (YoY) growth of 9% in total revenue, reaching USD 23.4 billion. This growth can be attributed to several factors, including increased vehicle deliveries and growth in other areas of the business. However, this positive trend was partially offset by a reduction in the average selling price (ASP) YoY, excluding the foreign exchange (FX) impact, as well as a negative FX impact of USD 0.4 billion.
• Profitability Challenges: Despite the revenue growth, the company experienced a YoY decrease in operating income, which amounted to USD 1.8 billion in Q3, resulting in a 7.6% operating margin. Several factors contributed to this decline in profitability, including a reduced ASP due to pricing and product mix changes, an increase in operating expenses driven by investments in projects such as Cybertruck and artificial intelligence (AI), and expenses associated with the production ramp and idle time due to factory upgrades. Additionally, negative FX impacts affected profitability. Nevertheless, there were some positive factors, such as the growth in vehicle deliveries (despite margin headwinds from new factory underutilization), lower cost per vehicle, IRA credit benefits, and gross profit growth in the Energy Generation and Storage, Services, and Other segments. Furthermore, the growth in regulatory credit sales contributed to profitability.
• Cash Position Improvement: The company reported a notable improvement in its cash position, with quarter-end cash, cash equivalents, and investments increasing by USD 3.0 billion sequentially, reaching USD 26.1 billion in Q3. This increase was driven by various financing activities, accounting for USD 2.3 billion, as well as positive free cash flow of USD 0.8 billion during the quarter. The improved cash position reflects the company's efforts in strengthening its financial resources.
  

• Production and Delivery Updates: In the past quarter, the company temporarily halted production lines at several factories for upgrades, leading to a sequential decrease in production volumes. They have made strides in smoothing out delivery rates over the quarter, with September accounting for a smaller portion of third-quarter deliveries compared to the previous year.
• Production in the U.S.: At Gigafactory Texas, pilot production of the Cybertruck is progressing as planned and remains on track for initial deliveries later in the year. The production rate for the Model Y in Texas is expected to gradually increase, aligning with the ramp-up of additional supply chain needs. Additionally, the production of the higher density 4680 cell is proceeding as scheduled, and the company is expanding capacity for cathode production and lithium refining within the United States.
• Production in China: The Shanghai factory in China has been operating near full capacity for several quarters, with no significant expected increase in the weekly production run rate. The Shanghai facility remains a primary export hub for the company.
• Production in Europe: The Model Y maintains its position as the best-selling vehicle in Europe year-to-date. Similar to Texas, the production ramp-up for the Model Y in Berlin-Brandenburg will be gradual.
• Artificial Intelligence Software and Hardware: The company's AI development focus centers on software that can safely perform real-world tasks. They have enlisted one of the world's largest supercomputers to expedite AI development, doubling their computing capacity compared to the previous quarter. The vast fleet of Tesla vehicles continues to generate anonymized data used for developing Full Self-Driving Capability features.
• Vehicle and Other Software: Tesla rentals through Hertz in the U.S. and Canada now include Tesla app access, enabling keyless lock/unlock via phone key, cabin preconditioning, charge tracking, and more. In-app service experiences have been redesigned, allowing customers to schedule service, access loaner vehicles, track service progress, and manage drop-off and pickup. Prospective customers can also schedule, locate, and test drive demo vehicles.
• Battery, Powertrain & Manufacturing: Despite macroeconomic challenges, scheduled factory shutdowns, and new factory ramp-ups, the average vehicle cost for Tesla was approximately USD37,500. The company continues to work on further cost reductions, especially in the context of high-voltage powertrain architecture for heavy vehicles, such as the upcoming Cybertruck, which will feature an 800-volt architecture.
• Energy Storage: Energy storage deployments increased by 90% year-over-year in the third quarter, reaching 4.0 GWh, the highest quarterly deployment ever. The growth is driven by the ongoing ramp-up of the Megafactory in Lathrop, CA, which is moving towards its full capacity of 40 GWh, including phase two expansion. Production rates further improved sequentially.
• Solar: Solar deployments experienced a sequential and year-over-year decline to 49 MW. This drop is attributed to sustained high interest rates and the end of net metering in California, which has created downward pressure on solar demand.
• Services and Other Business: As the global Tesla fleet continues to expand, the Services and Other business has been successful. Core drivers of profit growth year-over-year include Supercharging, insurance, and body shop and part sales. The pay-per-use Supercharging service remains profitable, even as capital expenditures are scaled up. The company is actively expanding Supercharging capacity and enhancing capacity management in anticipation of other automakers joining their network.

Technical Observation (on the daily chart)

The Relative Strength Index (RSI) observed over a 14-day period registers at 29.32, currently in oversold conditions expectations of taking support from the current important levels of USD 200.00-USD220.00. Furthermore, the stock's current position is situated below both the 21-day Simple Moving Average (SMA) and the 50-day SMA, potentially acting as dynamic short-term resistance levels.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is October 23, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.