The Fed Speaks 🎤 🇺🇸

Is it too early to consider nominating Tesla to the Hall of FAANG?? Maybe we should call it TFAANG? 🤣 Jokes aside, the American automaker topped off its end-of-year earnings today in spectacular fashion.

Earnings per share: $2.54 adjusted, +218% (analysts expected $2.36)
Revenue: $17.72 billion, +65% YoY (analysts expected $16.57 billion)

$15.97 billion of Tesla’s reported revenue came from automotive revenues, which were up 71% YoY. The company delivered 296,884 Model 3 and Y models in Q4 (and an additional 11,766 Model S and X models.) As we’ve seen from previous quarters, the decline in Model S and X production was sustained (-19% YoY), mostly at the cost of the Model 3 and Y’s success (+79% YoY.)

The company’s takeaway profit and margin rose nearly 6.5% YoY, helping pull up Tesla’s net income and net free cashflow to over $2 billion each.

If we zoom out from these stellar figures, Tesla pushed 2021 revenue to $53.82 billion, a 71% increase YoY. Pretty impressive for a company that was assailed a number of years ago for being “unsustainable” and “only profitable because of regulatory credit sales” (which represented an unimpressive $314 million, -22% YoY, in the quarter.)

The company also provided product updates in its earnings presentation about:

• Gigafactory construction in Shanghai, Berlin, and Texas. Tesla also indicated it’s still looking for a place to put its Tesla Semi, Roadster, and “Future Product” production line.
• Tesla suggested that it had become an industry leader in GAAP operating margin (TTM) by preserving costs. The company noted its operating margins were 12.1% in 2021, which bested nearly every other vehicle maker.
• More than 60,000 vehicles are now operating on Tesla’s Full Self-Driving (FSD) beta. In Q3 2021, that figure was just 2,000. This implies that the company’s self-driving ambitions are in high-gear.
• While Tesla is making most of its revenues from automobile sales, the company has put its energy business and other ventures on the back-burner. That’s probably because Tesla expects to achieve “50% average annual growth in vehicle deliveries” over a multi-year horizon. The only thing that can stop them? Supply chain nonsense. 🙄

All-in-all, $TSLA is starting to realize the value that investors anticipated many years ago. Many fundamentals ratios have started to fall back to Earth, while the price of the stock has stayed relatively stable. With this great success, Musk might receive the tail-end of his stock grant gift, aka another possible multi-billion dollar payday. 💰 💰

$TSLA is down 1% in afterhours.

Is it too early to consider nominating Tesla to the Hall of FAANG?? Maybe we should call it TFAANG? 🤣 Jokes aside, the American automaker topped off its end-of-year earnings today in spectacular fashion.

Earnings per share: $2.54 adjusted, +218% (analysts expected $2.36)
Revenue: $17.72 billion, +65% YoY (analysts expected $16.57 billion)

$15.97 billion of Tesla’s reported revenue came from automotive revenues, which were up 71% YoY. The company delivered 296,884 Model 3 and Y models in Q4 (and an additional 11,766 Model S and X models.) As we’ve seen from previous quarters, the decline in Model S and X production was sustained (-19% YoY), mostly at the cost of the Model 3 and Y’s success (+79% YoY.)

The company’s takeaway profit and margin rose nearly 6.5% YoY, helping pull up Tesla’s net income and net free cashflow to over $2 billion each.

If we zoom out from these stellar figures, Tesla pushed 2021 revenue to $53.82 billion, a 71% increase YoY. Pretty impressive for a company that was assailed a number of years ago for being “unsustainable” and “only profitable because of regulatory credit sales” (which represented an unimpressive $314 million, -22% YoY, in the quarter.)

The company also provided product updates in its earnings presentation about:

• Gigafactory construction in Shanghai, Berlin, and Texas. Tesla also indicated it’s still looking for a place to put its Tesla Semi, Roadster, and “Future Product” production line.
• Tesla suggested that it had become an industry leader in GAAP operating margin (TTM) by preserving costs. The company noted its operating margins were 12.1% in 2021, which bested nearly every other vehicle maker.
• More than 60,000 vehicles are now operating on Tesla’s Full Self-Driving (FSD) beta. In Q3 2021, that figure was just 2,000. This implies that the company’s self-driving ambitions are in high-gear.
• While Tesla is making most of its revenues from automobile sales, the company has put its energy business and other ventures on the back-burner. That’s probably because Tesla expects to achieve “50% average annual growth in vehicle deliveries” over a multi-year horizon. The only thing that can stop them? Supply chain nonsense. 🙄

All-in-all, $TSLA is starting to realize the value that investors anticipated many years ago. Many fundamentals ratios have started to fall back to Earth, while the price of the stock has stayed relatively stable. With this great success, Musk might receive the tail-end of his stock grant gift, aka another possible multi-billion dollar payday. 💰 💰

$TSLA is down 1% in afterhours.

The highly-anticipated (and *dreaded*) Fed meeting concluded today. The theme of this month’s meeting was “it’s time we end pandemic-era monetary policy” as JPow confirmed that the Fed is ready to raise interest rates at its March 15-16 meeting, marking the first time the U.S. has raised rates since 2018. 🇺🇸 

Stocks sold off the news. 🤷 The tech-heavy Nasdaq was the only index to close green, +0.02%. 💚 The Dow, S&P 500, and Russell 2000 all closed red, with the Russell losing the most, -1.38%. Here’s a general summary of the major points addressed at this month’s Fed meeting (and none of these was a major surprise):

1. The Federal Reserve is leaving interest rates unchanged for now (between 0-0.25%), but will hike those rates during its March 15-16 meeting. Rate hikes seek to combat inflation, which is well above the Fed’s 2% target rate (inflation was +7% YoY in December.)
2. The Fed will reduce its balance sheet next month, then it will halt asset purchasing in March — when the Fed buys bonds, prices go up and interest rates go down. When the Fed sells bonds, prices are pushed down and interest rates go up. The Fed commented that it will be “significantly reducing” its heavy balance sheet to combat inflation.
3. Jerome Powell announced that the U.S. is quickly approaching the end of its tight pandemic-era monetary policy. Specifically, Powell said “[inflation and unemployment] are calling for us to move steadily away from the very highly accommodative policies we put in place during the challenging economic conditions that the economy faced earlier in the pandemic.”
4. Generally speaking, the Fed will use two different weapons to combat inflation — reducing asset purchasing and raising the federal funds rate. Balancing these two actions is difficult, since both confuse the stock market and have the potential to cause temporary recession. JPow indicated that raising the federal funds rate will be the Fed’s primary means of reducing inflation.

The Fed anticipates that there will be three interest rate hikes this year and three rate hikes in 2023. This projection depends on the tentative assumption that inflation will fall below 3% by December 2022 and below 2% in 2022. With that being said, Jerome Powell also announced that nobody (including the Fed) really knows what kind of economic volatility awaits us this year. 🚨

Powell provided reassurance that regardless of what should happen to the U.S. economy in 2022, the Fed is preparing for all of the economy’s best and worst-case scenarios. 💪