Tesla Posts Unanticipated 4th Successive Quarter Of Profits

Tesla Posts Unanticipated 4th Successive Quarter Of Profits
July 24, 2020

 

Shares of Tesla Motors Inc. (Nasdaq: TSLA) hogged the limelight yesterday after the electric car manufacturer posted a surprise profit for the fiscal 2020 second quarter, while analysts anticipated the automaker to report a loss. With four consecutive quarters of profit, the stock is on track to join the S&P 500 index. The company’s market value is roughly $300 billion, almost $95 billion higher than that of Japan’s Toyota Motors (TM). The stock price of Tesla has appreciated nearly 300% in 2020, eclipsing the 1% gains recorded by the S&P 500 index and 6% loss posted by the Dow Jones Industrial Average. The stock closed at $1,513.07, down $79.26 or 4.98% from prior close.

Palo Alto, California-based Tesla posted second-quarter revenues of $6.04 billion, down 5% from $6.35 billion in the similar period last year.

For the quarter ended June, Tesla recorded a profit of $104 million, or $0.50 per share, compared with a net loss of $408 million, or $2.31 per share last year. Excluding charges, adjusted earnings were $2.18 per share in 2Q 2020, compared with a loss of $1.12 per share in the year-ago period. Analysts polled by FactSet had anticipated Tesla to report a net loss of $0.02 per share on revenues of $5.15 billion.

The company pointed out that the operating margin increased to almost 5% and anticipated it “to grow over time, ultimately reaching industry-leading levels.”

CEO Elon Musk stated there are no demand issues. Musk said, “Demand is not our problem. Most of the challenges, including some parts shortages, are related to supply-chain and production issues. Don’t worry about demand, that’s not the issue.”

Tesla stated that the unexpected profit was a result of “fundamental operational improvements.” Musk stated that expenses associated with factory shutdown were offset by cost-cutting measures.

During the second quarter, the company delivered 75,946 Model 3S/Y to customers, an increase of 5% on a y-o-y basis, and down 13% from the earlier quarter. However, Model S/ X deliveries were 6,326, reflecting a decline of 56% on a y-o-y basis and 59% from the earlier quarter.

Back in April, Tesla surprised investors by posting a first-quarter profit. In May, the company’s Fremont, California-based manufacturing facility was reopened in defiance of COVID-19 prohibitions. The local authorities discussed the issue with the company’s management and resolved the issue. Tesla filed a health and safety plan with authorities at that time.

During a call with employees, Elon Musk revealed that the second US car manufacturing facility is going to be established in Austin (Texas).

He further stated that the company is not vying to become “super profitable,” but concentrate on boosting growth, while manufacturing affordable electric cars.

Going forward, the company said, “We have the capacity installed to exceed 500,000 vehicle deliveries this year, despite recent production interruptions. While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target.”

Tesla refrained from providing FY 2020 outlook, citing “difficult” to forecast shutdowns and changes in consumer attitude during the second half of 2020. Notably, the word “pandemic” was used only on statutory legal disclosures at the end of the quarterly statement.

The company also underlined that it has adequate liquidity to finance production and spend on expansion plans.

In its quarterly earnings report, the company stated that it continues to increase production capacity for Model Y and compact SUV at Berlin and Shanghai factories, respectively. The company is on course to begin Model Y sales from both venues in 2021. The company is also planning to roll out an electric truck, Tesla Semi, in 2021.

Musk revealed that necessary work to set up a factory in Austin has started. The Austin facility will be involved in the production of Semi and the Cybertruck pickup, in addition to Model 3 and Model Y for the Eastern zone of North America.

Alyssa Altman, an auto-industry consultant with Publicis Sapient, opined that the quarterly results were “very strong,” paving the way for Tesla’s inclusion in the S&P 500 index (SPX).

Alyssa said, “Tesla is showing the market they move fast, make quick decisions and are not afraid of failure. They made bold choices to reduce costs while still launching a new model with all the challenges that go with a new model launch. In doing that, they are seeing success and confidence from the market. Any profit in this environment is good and shows resilience in uncertain times.”

A day before the results were announced, analysts at Bank of America Securities maintained a cautious posture on Tesla, stating that the stock had appreciated sharply within a short span of time and suggesting investors to “remain cautious despite hype and momentum.”

Nevertheless, the analysts at BoA upwardly revised the price target to $800, from $500, but ironically maintained a rating equivalent to “sell.” Notably, the average price target of Tesla, issued by 31 analysts surveyed by FactSet, is $912, with the highest price being $1,500.

The surprise quarterly profit and likely inclusion in the S&P 500 index are expected to keep the stock of Tesla bullish in the short-term.

Technically, the stock is making new highs after breaking above the resistance level of 900. The stock is also trading above its 50-day moving average. Additionally, the stochastic oscillator is in the bullish zone. Therefore, we are anticipating the stock to rally in the short-term. However, it should be noted that the stochastic oscillator has formed a negative divergence with the price. Therefore, extreme caution is required before opening new long positions. A stop loss should be strictly maintained.

tsl - technical analysis - 24th July 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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