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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Tesla, Inc.    TSLA

TESLA, INC.

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Tesla Extended Profit Streak With Record Quarterly Sales -- 2nd Update

10/21/2020 | 08:40pm EST

By Heather Somerville

Tesla Inc. extended its profitability streak in the third quarter and promised global production increases, in the latest sign the coronavirus pandemic has done little to dent Chief Executive Elon Musk's push to take electric vehicles mainstream.

The Silicon Valley car maker on Wednesday posted a net profit of $331 million for the three-month period ended Sept. 30. It marks Tesla's fifth-consecutive quarter in the black and keeps the company on track for 2020 to be the first calendar year of profitability after years of losses.

Mr. Musk called it Tesla's "best quarter in history."

The company forecast significant production growth next year, with plans including the roll out of its all-electric semitrailer truck and, potentially, its pickup truck. It also projected more cars coming out of its China factory and that its newest plants in Berlin and Texas would start making vehicles. The aggressive ramp-up puts Tesla a step closer to achieving the global footprint Mr. Musk has long sought.

Tesla also revived a pre-pandemic target to build at least 500,000 vehicles this year, which Mr. Musk laid out in January, an increase of at least 36% from last year. Tesla hadn't formally withdrawn that guidance but until now had largely ignored the projection that seemed improbable at the onset of the pandemic, when it temporarily shut down its lone U.S. factory as local health officials worked to contain the spread of the coronavirus.

"While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target," the company said. Reaching that lofty sales level will rely on building more cars at its Shanghai factory, Tesla said, as well as further improvements in logistics and delivery.

Mr. Musk, asked on an investor call if deliveries next year could reach 840,000 to 1 million vehicles, said "it's in that vicinity."

The pandemic disrupted Tesla's operations principally in the second quarter, but the company quickly rebounded. Earlier this month, Tesla reported record car sales for the third quarter, with 139,593 vehicle deliveries in the period, suggesting the target of 500,000 deliveries for the year was in reach.

Tesla posted a record $8.77 billion in revenue for the quarter, a 39% jump from a year ago. Analysts surveyed by FactSet expected sales of $8.28 billion.

The company was buoyed by efficiencies in manufacturing, including lower battery and purchasing costs at its production facility in China, as well as growing demand in that country for electric cars. Its ability to sell emission credits to rivals to meet regulatory requirements has padded the bottom line.

Shares were up more than 3% at about $438 in after-hours trading. Tesla shares have roughly quintupled since the start of the year.

"The real story was the ability to drive better margins despite prices that are flat to down," said Toni Sacconaghi, an analyst with Bernstein Research. "They sound pretty pedal-to-the-metal in terms of growth."

Tesla has been trying to cut costs and build cars more efficiently in part to reflect a shift in customers that are increasingly buying its more-affordable Model 3 car and Model Y sport-utility vehicle, rather than the higher-priced models that would contribute a larger profit. The company said the factories in Texas, Berlin and Shanghai would all produce Model Y vehicles next year.

"We expect our operating margin will continue to grow over time, ultimately reaching industry-leading levels," Tesla said in its shareholder report.

However, Mr. Musk cautioned on the investor call that production at the new factories will start off slowly and may take up to two years to reach capacity.

The construction of sprawling new factories for battery-cell manufacturing and car production come at a sizable cost. The company said it plans to spend an additional $2 billion to $2.5 billion on capital expenditures in 2021 and 2022. Its bet is that a large enough global footprint that enables Tesla to build cars in the same market where they are delivered will continue to improve margins.

Mr. Musk's goal to turn electric vehicles from a niche market to having mass-market appeal appeared to gain traction in the second half of last year as Model 3 sales fueled massive growth, and after Tesla successfully opened its first overseas assembly factory in China, where the company has churned out cars with lower-cost labor.

Tesla posted a $143 million profit in the third quarter of last year, and has stayed profitable since.

Mr. Musk has laid out a bold vision to be the world's largest auto maker, although the entrepreneur has been prone to hyperbole. At a shareholder event last month, he said he expects Tesla to build 20 million cars annually within the decade, and laid out a plan to use lower-cost batteries to make a $25,000 electric vehicle, which would be significantly cheaper than anything Tesla currently sells. "I do not think we lack for desire for our product but we do lack for affordability," Mr. Musk said Wednesday.

Tesla said it has bolstered production at its factory in Fremont, Calif., so that it can produce 500,000 Model 3 and Model Y vehicles a year, a slight increase in capacity.

Its Berlin factory is under construction, and Tesla plans to move in equipment in the coming weeks, with production starting next year, the company said. Mr. Musk added that the Cybertruck, a stainless-steel, futuristic and abrasive-looking truck the company unveiled a year ago, would start shipping to customers at the end of next year "if things go well" with most of the deliveries coming in 2022.

The latest quarterly profit will likely revive debate about Tesla joining the S&P 500 stock index. Tesla qualified for inclusion in the index after reporting a profit in the second quarter this year, but was left out in the latest update.

Write to Heather Somerville at Heather.Somerville@wsj.com

(END) Dow Jones Newswires

10-21-20 2039ET

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.83% 30218.26 Delayed Quote.5.01%
NASDAQ 100 0.49% 12528.482731 Delayed Quote.42.76%
NASDAQ COMP. 0.70% 12464.232074 Delayed Quote.37.63%
S&P 500 0.88% 3699.12 Delayed Quote.14.50%
TESLA, INC. 0.95% 599.04 Delayed Quote.615.99%
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Financials (USD)
Sales 2020 30 708 M - -
Net income 2020 1 265 M - -
Net cash 2020 1 836 M - -
P/E ratio 2020 473x
Yield 2020 -
Capitalization 568 B 568 B -
EV / Sales 2020 18,4x
EV / Sales 2021 12,7x
Nbr of Employees 48 016
Free-Float 80,0%
Chart TESLA, INC.
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Tesla, Inc. Technical Analysis Chart | TSLA | US88160R1014 | MarketScreener
Technical analysis trends TESLA, INC.
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 37
Average target price 397,55 $
Last Close Price 599,04 $
Spread / Highest target 30,2%
Spread / Average Target -33,6%
Spread / Lowest Target -86,6%
EPS Revisions
Managers
NameTitle
Elon Reeve Musk Chief Executive Officer & Director
Robyn M. Denholm Chairman
Zachary Kirkhorn Chief Financial Officer
Kimbal Musk Director
Ira M. Ehrenpreis Independent Director
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