A record quarter for Tesla TSLA 1.57%
is not as fast as it seems.
Tesla announced Saturday morning that it had shipped 180,570 cars worldwide in the fourth quarter, setting a new company record. This means that the total of 500 000 in 2020 is just shy, in line with the latest management of the company. The company also said it will soon begin delivering its China-made Model Y crossover vehicle to customers.
While good clues are certainly good news, it’s hardly a major operating performance that should blind Wall Street. To begin with, the meeting with operational forecasts is a routine opportunity for most members of the S&P 500, to which Tesla was added last month.
And investors should not forget that CEO Elon Musk once claimed in 2016 that Tesla would sell one million cars by 2020. Since making the claim, Tesla’s share has risen nearly fifteenfold. Last year also came and went without Mr. Musk’s promise that a million autonomous ‘robot tax’ would be taken to the streets by the end of 2020.
The company said it manufactures nearly as many cars as it delivered to customers in the fourth quarter. But in October, Tesla said it had installed enough production capacity in the quarter to earn 210,000, indicating that capacity utilization in the quarter was a reasonable pedestrian of 86%.
As a result of last year’s stormy rally, Tesla’s market value is nearly $ 670 billion. That amounts to $ 1.3 million per car sold last year, and is about seven times the combined market value of Ford and General Motors.
Yet Tesla has a small share in the global car market, and competition for electric cars is starting to intensify. To justify the price on the stock, Tesla needs to blow beyond its own predictions and not just live up to them.
What is small, the small profit that Tesla makes is strongly flattered by the sale of regulatory credits to help competitors achieve the emission mandates. While the fourth quarter quarter will not be announced until Tesla announces full financial results, Tesla booked $ 1.3 billion in such sales in the four quarters ahead of time, which has a 100% profit margin. The profit source can wither as more competitors from automated manufacturers come online, which can mean fewer buyers for the credits.
These concerns do not bother the shareholders who are sitting with big profits. The recent history does offer a warning: Tesla’s market value has been cut in half twice, in two deliveries since 2018. If that had happened, the stock would still have deteriorated about 700 times. The leaders of the automotive industry have historically been fortunate to issue a valuation of ten times the earnings.
Mr. Musk wisely decided to sell $ 10 billion last year amid the furious rally. For average investors, it is probably a good idea to follow its lead.
Write to Charley Grant by [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8