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Tesla reports a fourth-quarter profit, and its stock soars again

Tesla is flying high. Its market value has recently been above $ 100 billion. Auto sales have reached record highs. And on Wednesday, Tesla reported a profit for the final quarter of 2019 – its second quarter profit in a row.

Company officials said the new Model Y crossover vehicle will ship by the end of this quarter, earlier than expected. That and earnings – which exceeded analyst expectations on a per-share basis – sent Tesla’s share price jumping again, to more than $ 600 per share.

In solid black, net income for the fourth quarter, measured by generally accepted accounting principles, fell 25% to $ 105 million compared to the year-ago quarter. Revenue for the quarter grew 2% year over year to $ 7.38 billion. Of that, $ 133 million came from the sale of regulatory credits.

For the full year, Tesla made a loss of $ 775 million compared to $ 1.06 billion in 2018. Its annual revenue grew 14.5% to $ 24.58 billion. The energy business, which includes solar power installation and battery storage packs, decreased slightly throughout the year, with revenues ranging from $ 1.55 billion to $ 1.5 billion.

Free cash flow rose 11% to $ 1.01 billion from the same quarter a year earlier. This was almost three times the previous quarter’s rate. But payables liabilities and accounts payable – basically bills not yet paid – increased sharply from a year ago. Accrued liabilities increased 38% to $ 2.9 billion and payables payable increased 11% to $ 3.7 billion.

The electric vehicle company’s share price, which closed at a high of $ 580.99 on Wednesday, rose 12% after trading in the market at around $ 653 news. It was already 39% for the year.

Dan Ives of Weinbush Securities said in an investor note that although the company’s stock may be oversubscribed, a profitable quarter is good for the future.

IVS wrote, “The company has the most impressive product road map from any technology / auto vendor … and the Model 3 will be the” game changing “driving force for EV Transformation with front and center.”

The company opened its new China factory earlier this month. In addition to the much-awaited Model Y, Tesla has a semi truck in the works and a “cyberbrook” pickup.

This does not mean that all future roses. Short sellers, who bet that the company’s share price will fall, are still in play, with Tesla owning 20% ​​of the outstanding shares.

“De Woods is not far off, too,” said Peter DeCaprio, who, as chairman of the firm Crow Point Partners’ investment in Boston, has a sour outlook about Tesla’s prospects and the company’s losses in the first quarter of this Looks to return. year.

Even some Tesla bulls, given information about Wednesday’s earnings report, do not make much of a change in the share price.

“I think Tesla is valued correctly,” said Ross Gerber, who runs with Gerber Kawasaki, a Santa Monica investment firm, he said, about 8% of his investment in Tesla. “If you’re looking for a value stock, it’s not Tesla right now. But it’s really being recognized for a growth company.”

Growth and earning prospects remain controversial topics for bulls and bears.

Although Tesla car deliveries grew 48% to around 367,000 vehicles in 2019, according to sales tracker Inservis, the growth rate for the US was only 14%.

And for the final quarter of 2019, Tesla sales in California, compared to the company’s largest US market by far, decreased by half to 13,584 from the previous year. This is according to the Dominion cross-sale, which collects and analyzes registration data. Tesla is not out of sale by state.

Tesla’s growth rate in Europe and China will be critical to its growth prospects. Tesla sold about 109,000 cars in Europe last year, or about 31% of total EV sales, more than any other carmaker, said Matthias Schmidt, who runs SNA data in Berlin. But by the time heavy regulations are implemented in Europe for the sale of zero emission cars, competition from Europe’s own car manufacturers will be fierce.

Tesla plans to build a new car factory near Berlin that will eventually produce 500,000 cars a year. Constant rapid development will be required to achieve that level.

Many analysts are looking to China to improve Tesla’s future. Nearly 43,000 Teslas were sold in China in 2019, Inside Eaves estimates. The company opened its new factory near Shanghai this month, and it plans to start pumping cars at an annual rate of 150,000, including the upcoming model crossover. The factory has plans to increase the annual capacity to 500,000.

It is unknown at this point what effect Coronovirus will have on Tesla’s ability to influence production in China. At the very least, outbreaks can reduce the movement of people, vehicles, and goods.

Whatever stems from the epidemic, Crow Point DiCaprio said, looking at weak auto sales and intense EV competition, “I don’t think there is a demand in China that people think there is.”

Gerber has a more optimistic view. Younger, tech-savvy Chinese will turn to Tesla, he said, and margins will be much better for cars made in China, built at Tesla’s second plant in California.

“They will be more efficient with (employees) who cannot complain about the work environment,” he said. “And labor costs are low.”

Financial data provider FactSet reports that the average target price for Tesla stock among 22 analysts is $ 399 a share – lower than its current price but around 150% in the last six months.

Three of those analysts think Tesla shares are ultimately worth $ 600 or more, and six of them are valued at $ 300 or less, with one analyst aiming for less than $ 215.

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