Tesla Inc (NASDAQ: TSLA), Nvidia Corporation (NASDAQ: NVDA) and Meta Platforms Inc (NASDAQ: META) are three technology companies that are well known to many investors.
A strong share price performance could be an indication that the market is expecting better performance from these companies.
This expectation could also sustain the share price performance of these companies.
All three stocks recorded substantial share price declines in 2022 but made a significant recovery in 2023, outperforming the broader market.
Tesla Inc (NASDAQ: TSLA)
Tesla’s share price is up more than 139% year to date.
Tesla’s revenue for the first quarter of 2023 (1Q 2023) increased 24% year on year from US$18.8 billion to US$23.3 billion. Revenues declined 4% sequentially from $24.3 billion in 4Q 2022.
Tesla delivered 422,875 cars in 1Q 2023, 36% higher than 1Q 2022 where it delivered 310,048 cars. Deliveries also increased 4% sequentially from 4Q 2022 with 405,278 cars delivered that quarter.
Gross margin for 1Q 2023 stood at 19.3%, a 9.8 percentage point decline year on year and a 4.5 percentage point sequential decline.
The lower gross margin was attributed to price reductions on many vehicle models across regions. However, Tesla expects the cost of production to decrease from operating leverage and lower logistics costs, thereby boosting margins in the medium term.
Net profit for 1Q 2023 was 24% lower year on year at US$2.5 billion as compared to U$3.3 billion for 1Q 2022. Net profit was also 32% lower than the prior quarter at US$3.7 billion.
CEO Elon Musk provided an optimistic outlook, expecting the company to produce around 1.8 million cars in 2023, 29% higher than the 1.37 million cars produced in 2022.
In addition, the Cybertruck remains on track to begin production this year at its Gigafactory in Texas, adding to total production volumes.
At Tesla’s recent investor day, CEO Elon Musk announced a retail electricity plan to people living in Texas and owning Tesla vehicles.
In this plan, customers will be offered unlimited overnight home charging for US$30 per month.
CEO Elon Musk also announced his next master plan, sharing his vision of a total switch to electric vehicles and US$10 trillion in global spending to develop sustainable energy worldwide.
Tesla has also tied up with General Motors (NYSE: GM) and Ford Motors (NYSE: F), providing access for GM and Ford’s car owners to its charging network.
Nvidia Corporation (NASDAQ: NVDA)
Nvidia’s share price is up more than 186% year to date.
Nvidia’s revenue for the first quarter of fiscal 2024 (1Q FY2024) ending 30 April decreased 13% year on year from US$8.3 billion to US$7.2 billion.
However, revenue increased 19% from $6.1 billion in 4Q FY2023.
All of Nvidia’s four revenue segments, namely, Gaming, Professional Visualisation and Automotive and Embedded Systems, achieved quarter-on-quarter revenue growth.
In spite of strong sequential revenue growth of 22% and 31% respectively, the Gaming and Professional Visualisation segments still have much to catch up on as these segments recorded a 38% and 53% year-on-year decrease in revenue, respectively.
Earnings per share for 1Q FY2024 stood at US$0.82, up 28% year on year and up 44% quarter on quarter.
The most mind-blowing part of Nvidia’s announcement was its 2Q 2024 outlook. Nvidia has guided for revenue to be about US$11 billion. The forecast is underpinned by progress across all four segments.
Some noteworthy progress shared by Nvidia is the use of its Graphics Processing Unit by Google Cloud and Amazon Web Services to accelerate AI applications and offer new products and services.
Meta Platforms Inc (NASDAQ: META)
Meta Platform’s share price is up more than 117% year to date.
The company’s family of apps consists of Facebook, Instagram, Messenger and WhatsApp and recorded a year on year increase in active users from 2.87 billion daily active people in 1Q 2022 to 3.02 billion daily active users for 1Q 2023.
Meta’s operating margin increased from 20% in 4Q 2022 to 25% in 1Q 2023 marking the first quarter since 1Q 2021 with a meaningful increase.
Before 1Q 2023, Meta’s operating margin was on a declining trend almost every quarter since 2Q 2021, bottoming at 20% for 4Q 2022.
The improvement in operating margin is attributed to Meta’s Cost of Revenue.
Meta’s cost of revenue for 1Q 2023 accounted for 21% of revenue, one percentage point lower as compared to 1Q 2022’s cost of revenue and five percentage points lower than 4Q 2022’s.
Meta also controlled its General & Administrative (G&A) costs well.
G&A costs as a percentage of revenue declined year on year from 12% of revenue in 1Q 2022 to 11% of revenue in 1Q 2023. G&A costs as a percentage of revenue also declined sequentially from 14% of revenue in 4Q 2022 to 11% of revenue in 1Q 2023.
Meta achieved G&A costs reduction by implementing several restructuring measures such as the laying off of approximately 11,000 employees and reducing its lease footprint.
As the first wave of layoffs were carried out in November 2022, Meta’s financials in 1Q 2023 was the first quarter to reflect the full effect of these cost saving measures.
In its 4Q 2022 earnings call, CEO Mark Zuckerberg shared that Meta considers 2023 to be its “Year of Efficiency” and management will focus on making the company a stronger and more nimble organisation.
Meta may record even more cost reductions for 2Q 2023. In April 2023, Meta announced a second round of layoffs and a third round of layoffs is being planned for the end of May.
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Disclosure: Alex Yeo does not own shares in any of the companies mentioned.
