Tesla (TSLA 11.00%) shareholders have successfully started 2023. This week’s gains were fueled by an earnings report that gave several reasons to be positive about the electric vehicle (EV) producer and its stock.
As early Friday morning, Tesla shares had increased about 23% for the week.
Tesla’s key metrics increased. Revenue of $24.32 billion increased 37% year on year, but the most encouraging development was that operating expenses fell 16% yearly.
This contributed to a 43% increase in adjusted net income to $4.11 billion, or $1.19 per share in adjusted earnings. From 2021 levels, sales increased by 51%, and adjusted net income increased by 85% for the whole year.
The company announced fourth-quarter and entire 2022 earnings on Wednesday, accounting for half of those gains.
However, the rest of this week has been positive for Tesla shareholders, as investors are beginning to believe that the EV price cuts announced a few weeks ago are not a warning sign for the company after all.
Tesla’s revenue jumped by 37% in Q4
The earnings report appeared to confirm this. Tesla’s total revenue jumped by 37% in the fourth quarter, while net income increased by 59%. The demand destruction that some had predicted the company was facing was nowhere to be found.
Tesla plans to continue expanding its operations. It explained that while it may not meet its yearly 50% production growth target, it intends to stay on track in the long run. Furthermore, it expects to make up ground in 2023, with a more than 50% increase in production to 1.8 million vehicles.
Production rate to increase by 40% in 2023
Indeed, CEO Elon Musk stated on the quarterly earnings call that customer growth for its electric vehicles continued to increase, with the highest year-to-date order level ever.
He also noted that the order rate doubled the company’s current production rate. Its EV output rate is expected to increase by at least 40% by 2023.
Musk sought to soothe demand concerns, claiming that January orders were the highest in the company’s history and nearly double the rate at which Tesla is producing EVs.
Between cost cuts and initiatives to make vehicles more affordable for low-income buyers, Tesla sent a message that its shareholders appreciated, and optimistic outlooks could keep the stock moving higher.
Tesla reported record fourth-quarter net income, and full-year net earnings more than doubled from its 2021 total to $12.6 billion.
Tesla’s stock will continue to soar
These bottom-line numbers helped convince investors that Tesla’s strategy of accepting lower profit margins in exchange for higher sales is the right one.
Tesla’s growth rate may vary, and the company may need to meet its 50% annual growth goal for vehicle production volume.
However, investors can now see that their concerns about demand destruction were unfounded and that the company’s strategy to sustain leadership in the booming EV sector is working.
