Polestar stock (NYSE: PSNY) rose over 20% yesterday after the company released its earnings for the third quarter of 2022. Polestar’s operating losses narrowed in the quarter while it posted a surprise profit.
Polestar reported revenues of $435 million in the quarter. While the revenues doubled on a YoY basis they fell short of the nearly $471 million that analysts were expecting. The company sold lower prices variants in the quarter which led to lower revenue per car.
Polestar posted a gross profit of $4 million in the quarter as compared to an operating loss of $35 million in the corresponding quarter last year. Its operating losses also narrowed to $192 million from $296 million.
Polestar posted an EPS of 14 cents in the quarter. The surprise profit came in due to an accounting adjustment. Since its stock price has almost halved since it went public, Polestar revalued the future share payouts.
Polestar currently has two models on the road and it launched a new model last month. The company is looking to launch one EV model every year.
Polestar Stock Rose after Q3 Earnings Release
Polestar meanwhile is facing currency headwinds. During the earnings call, CFO Johan Malmqvi said, “As our cars are produced in China, the majority of our costs are in renminbi, which has strengthened against European currencies, leading to a higher cost of sale.”
Polestar produces its cars in China but sells them in other markets also, especially in Europe and North America. The company would set up a plant in the US also. In order to be eligible for the $7,500 federal EV tax credit in the US, the car has to be necessarily assembled in North America.
Tesla would be among the beneficiaries of the Inflation Reduction Act of 2022 as its cars, which currently don’t qualify for the tax credit, would also be eligible for one beginning next year. Analysts see the Inflation Reduction Act as a positive for Tesla stock. We have a guide on how beginners can buy Tesla stock.
Polestar Maintained 2022 Delivery Guidance
Polestar maintained 2022 delivery guidance of 50,000 cars for 2022. The guidance implies deliveries of 19,600 vehicles in the fourth quarter of 2022. Notably, Polestar had previously downwardly revised its 2022 guidance from 65,000 to 50,000 due to supply chain issues.
Almost all automakers are grappling with supply chain issues. Rivian also lowered its guidance earlier this year. Lucid Motors downwardly revised its 2022 production guidance twice this year. However, all these companies maintained their revised 2022 guidance during the Q3 2022 earnings call.
Tesla meanwhile lowered its 2022 guidance and said that deliveries wouldn’t rise by 50% this year as it had previously predicted. The Elon Musk-run company meanwhile expects deliveries to rise at a CAGR of 50% over the long term.
Polestar Secures Funding from Shareholders
Polestar had nearly $1 billion as cash and cash equivalents on its balance sheet at the end of September. The company secured another $1.6 billion in financing from its shareholders. It said that its well-funded until the end of 2023 after the new financing.
Volvo Cars would provide Polestar with $800 million in the form of an 18-month term loan with an option for equity conversion. PSNY said, “This loan amount is on par with the direct and indirect financial and liquidity support that Polestar’s other major shareholder, PSD Investment, is providing.”
Commenting on the funding, Polestar CEO, Thomas Ingenlath said “We welcome the continued support from our major shareholders at a time when the capital markets are volatile and unpredictable.”
The optimism is not unfounded as several EV startups are facing a cash crunch. Arrival, for instance, has said that it does not have enough cash to fund its operations in 2023. Even Lucid Motors is raising money by selling shares.
Rivian meanwhile said that it has enough cash to fund its capex until 2025. Rivian is backed by Ford and Amazon and the latter has placed an order for 100,000 delivery vans from Rivian. Analysts see Rivian stock as a buy due to its strong balance sheet and the backing from Amazon and Ford.
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