While annual profit remains elusive, the results pushed its shares up as much as 11% on the heels of an eye-popping run that began in October.
The Silicon Valley-based carmaker reported net income for the quarter of $105 million on revenue of $7.38 billion. Adjusted EPS was $2.14. That topped expectations of $1.72 a share and revenue of $7.02 billion, according to a Reuters survey of equity analysts. Tesla once again got a boost from sales of zero-emission and other regulatory credits to other automakers in the quarter, booking $133 million of the free money.
The shares spiked following the results announcement, rising 11% to $644.99 in after-hours Nasdaq trading. They’ve has more than doubled since a surprise third-quarter profit announcement on Oct. 23.
Last year “was a turning point for Tesla,” Musk said in a letter to investors. “We demonstrated strong organic demand for Model 3, returned to GAAP profitability in 2H19 and generated $1.1B of free cash flow for the year. We achieved strong cash generation through persistent cost control across the business.”
After years of wobbly finances, wild stock price swings, unfulfilled promises and Musk’s self-inflicted wounds from fights with securities regulators and critics, the company may be showing signs of more stable operations. Namely, it’s targeting positive GAAP-based net income for future quarters and says volume growth and cash generation are the main focus.
“This quarter may be seen as the moment a new genre of tech investors were waiting to perceive Tesla through a new narrative: as a profitable and cash generative tech company with a reasonably-sized market cap in the same discussion as the mega-tech ‘platform’ names,” Morgan Stanley equity analyst Adam Jonas said in a research note.
Tesla aims to deliver more than 500,000 vehicles this year, up from 367,500 in 2019, including more than 295,000 Model 3s, priced from about $40,000.
In a surprise announcement, it said production of Model Y crossovers started this month at the Fremont, California, plant, earlier than initially scheduled. Meanwhile, Tesla’s Shanghai plant that opened in record time in January is running “as expected.” Preparations for its third vehicle assembly plant, to be built near Berlin, are moving ahead and initial deliveries from it are targeted for as early as 2021.
That remains to be seen, owing to local German opposition to Tesla’s plans to cut down a portion of existing forest and concerns about how much water the plant will use.
“Tesla got a bit lucky in that the market evolved around them: unplanned, the Model Y might slide right in the sweet spot for the EV crossover market,” said Jessica Caldwell, executive director of industry insights at Edmunds. “It has a more prestigious brand than the mainstream hybrid nameplates but comes at a significantly less cost than the rest of the luxury competition.”
The stock surge has also dramatically increased Musk’s wealth. Forbes estimates the South African-born entrepreneur’s net worth at $32.3 billion.
Tesla’s full-year loss was $862 million on record revenue of $26 billion. A decade after its initial public offering it’s never posted an annual profit.
Amid the rosy numbers, CFRA equity analyst Garrett Nelson, who has a Sell rating on Tesla, thinks there are still reasons for caution. “We continue to see significant risks related to the China factory ramp-up, as well as rising EV competition from automakers still eligible for the full federal tax credit in the U.S.,” Nelson said in a research note. “TSLA also did not provide detail regarding capex related to its new factory in Germany.”