Refinitiv Analyst Jharonne Martis joins Yahoo Finance Live to discuss Tesla’s latest earnings results, causing the auto makers’ stock price to fall.
AKIKO FUJITA: Let’s turn our attention to Tesla now. We are seeing shares sliding, down about 3% in the session after the company missed analyst estimates. It did, though, post its first annual profit.
Let’s bring in Jharonne Martis, Refinitiv analyst. Jharonne, it’s funny we’re talking about all of these stocks right now about speculative, because what was it, a few years ago people were saying Tesla was one of those stocks. They did sort of hit the point or hit the goal on deliveries, half a million. We’re talking about the first annual profit being posted. Why do you think it’s sliding in the session?
JHARONNE MARTIS: The stock is definitely sliding because it missed on earnings expectations. And also, it failed to give any specific guidance on the top line or bottom line. But regardless of all this, it’s important to note that this is a company that posted over a 90% growth in earnings and over 40% growth in revenue. And when you look at the tone of the call yesterday, there’s a lot of positive notes of growth, indicating that there will be some growth in the near future that are optimistic and are working towards– in the favor of the company.
ZACK GUZMAN: Yeah, I mean, there’s a lot of things that they’re working on, robo taxis and the technology there as well that has been hinted at, Autopilot as well getting better. What is maybe the updated thinking in terms of hitting those guidelines and timeline that Elon Musk has laid out? Because historically in years past, it hasn’t necessarily maybe lived up to some loftier goals. But now we are seeing that change.
JHARONNE MARTIS: Definitely, and I think 2020 was a very challenging year. And the fact that they met those goals that they had set for themselves on top of all those obstacles, talks volumes about how progressive they are about their production, right? They want to maintain those relationships with their suppliers, but they also want to be more efficient in how they continue to produce a lot of their vehicles. And therefore, they are expanding their presence by opening in the Bay Area, producing their own battery cells in Texas and in Germany, which analysts polled by Refinitiv do see as a bullish move, especially because the consumers internationally are focusing more on decarbonizing the economy, especially in Netherlands and Norway. That those are two economies where Tesla continues to grow and are expected to continue to grow.
Analysts polled by a Refinitiv are also bullish on the company’s expansion into China. Currently, Tesla makes about– generates about 60% of its revenue in China. And that’s expected to continue to grow even further to about 40% in 2022. So analysts polled by Refinitiv are bullish on these moves that the Tesla is doing and how they’re growing internationally. In a recent survey–
AKIKO FUJITA: On the issue of the Shanghai factory, though, there’s going to be a lot of attention, at least in this current quarter, paid to deliveries on the Model Y. What specifically are you expecting on that front?
JHARONNE MARTIS: Well, what’s interesting is that the stock also got a lot of– the stock also fell because there was a lot of negativity around the gross margins, right? And this is tied to the gross margins, because the company did lower the prices on a lot of their vehicles in 2020, and therefore increasing a lot of the market share. But in the call yesterday, they seem to be more optimistic in the fact that they’re going to increase the prices of these vehicles, as they already have– they believe that they already have the strong demand for these cars, which will actually improve the gross margins further into 2021.
ZACK GUZMAN: Yeah, I’m glad you talk about the gross margin, because that was definitely something that caught a lot of people’s attention there. The other thing that maybe is an important point I always bring up is just kind of the cash position of Tesla now, considering some of those concerns just a year ago, when you think about where they were at. This time around, obviously, not at all as concerning. When you look at that, though, how ambitious do you think they are being about maybe putting some of that capital to work, not just on those factories, as you mentioned, but maybe, as I said, those more ambitious goals and robo taxis and the like beyond?
JHARONNE MARTIS: Well, it’s interesting, right, because that’s where the CEO sees its valuation in the robo taxis and increasing the utility value. Using our social media monitor at Refinitiv, we can see that investors are actually seeing that increase in valuation more on the fact that the company will turn into a profit very quick over the next two years. But however, when digging into the numbers, the analysts polled by Refinitiv do see the growth into a lot of the international expansion, because in a recent survey we did at Refinitiv with Maru/Blue Public Opinion, we discovered that Americans are telling us that even after the pandemic, they intend to stay away from large crowds and probably drive to go see a relative instead of flying, and also avoid public transportation.
So as health and wellness are becoming more and more at the core of the consumer, the electric vehicles are not only becoming more popular and more attractive because of their green sector and decarbonizing the economy, but also because of their battery accessibility. It’s much more easier to charge these batteries. They’re becoming more fast and efficient, and also more cost efficient as compared to fueling with gasoline, which is why also analysts polled by Refinitiv believe that this is an attractive market, especially in Europe, and placing the factory in Germany, as a lot of the countries, like Netherlands and Norway, continue to grow market share, as decarbonizing the economy is at their core of their beliefs.
ZACK GUZMAN: Yeah, the US not alone in making climate change a pressing issue on that front. But Jharonne Martis, analyst at Refinitiv, appreciate you coming on here to chat that today.