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Tesla disappoints Wall Street despite strong profits

The electric car maker reported fourth quarter adjusted income of $903 million, excluding special items, more than double its earnings a year ago but short of the $1.1 billion forecast by analysts. Net income was $270 million, well short of the $780 million estimated by Wall Street.

The company posted quarterly revenue of $10.7 billion, which was up 46% from a year earlier, and which — unlike the profit numbers — topped Wall Street forecasts.

Still the results capped a year of strong growth for the company despite the problems associated with Covid-19 temporarily shutting factories and sparking a global recession that slowed auto sales overall.

Revenue was up 31% for the year, and adjusted income was up more than 6,700% from the modest profit Tesla posted on that basis in 2019, the automaker’s first profitable year. Net income for 2020 was $721 million, compared with a net loss of $862 million a year earlier.

And the company gave a bullish outlook for the future, predicting that it will be able to have sales growth of 50% or better annually, and that it expects 2021 will be one of those years it tops that target.

Tesla opened its second automotive factory in Shanghai in late 2019, and is in the process of building new factories near Berlin, Germany and Austin, Texas.
Its 2020 sales of about 500,000 cars are still a fraction of those sold by established automakers. Volkswagen, the industry leader, sold 9.3 million vehicles last year. But established automakers like Volkswagen and General Motors (GM) are scrambling to shift production from traditional gasoline powered cars to electric vehicles.

Tesla also said it expects its profit margin to continue to improve. It reported full-year gross automotive profit margin of 25.6%, up 4.4 percentage points from a year earlier.

It now has all the cash it needs to fund future vehicle and expansion plans, the company said. It produced free cash flow of $2.8 billion, up 158% from a year earlier, which was the first year it ever had positive cash flow. Before that the company was frequently in a cash crunch. The demand for its stock has allowed it to raise billions in the last year through a series of additional stock offerings.
Despite the positive results, shares of Tesla (TSLA) fell about 6% in after-hours trading, although that was up from a steeper drop immediately after the report was released. Shareholders enjoyed a 743% rise in the stock price in 2020 and a 25% year-to-date surge through Wednesday’s close, making it by far the most valuable automaker in the world. Tesla is worth more than the 10 largest automakers combined, and is now one of the most valuable US companies of any kind.

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