Tesla Notches First Full-Year Profit, Aided By $270 Million Fourth-Quarter Net Income

Tesla Notches First Full-Year Profit, Aided By $270 Million Fourth-Quarter Net Income

Tesla reported net income of $270 million in 2020’s final quarter, helping Elon Musk’s electric vehicle powerhouse notch its first profitable year. As usual, sales of pollution credits helped keep the company in the black. 

The Palo Alto, California-based company said it had earnings per share of 24 cents on a GAAP basis for the quarter that ended Dec. 31, 2020, and 64 cents for the year. Full-year net income was $721 million. Quarterly revenue, led by sales of the company’s Model 3 and Model Y electric vehicles, was $10.7 billion and the annual tally was a best-ever $31.5 billion.

“Despite unforeseen global challenges, we outpaced many trends seen elsewhere in the industry as we significantly increased volumes, profitability and cash generation,” Musk said in a letter to shareholders. While the company didn’t immediately provide sales or production guidance for 2021, it suggested this year could see growth of more than 50% owing to increased output in China. 

The results were solid but slightly below expectations, according to Wedbush analyst Dan Ives. “Pro-forma EPS was $0.80 vs. the Street estimate $1.02, although going forward the core profitability picture continues to improve at an accelerated rate which is key for the bulls,” he said in a research note. 

The company’s shares fell 2.1% to $864.16 before results were released, and dropped a further 3.4% in after-hours Nasdaq trading.

Teslas have become more affordable in the past few years with the introduction of the Model 3 and Y, but the company’s average price per vehicle in the fourth quarter of $51,581 was still several thousand dollars above the U.S. industry average price that Edmunds estimates was $40,184.

“Tesla’s fortunes would only seem to look brighter in light of the new presidential administration signaling strong support for electric vehicles, but there are challenges ahead for the company that could take some of the wind out of its sails,” said Jessica Caldwell, Edmund’s executive industry analyst. “Although there has yet to be a true “Tesla killer” in the EV arena, a bigger pool of contenders eligible for federal tax credits could have the power to sway some Tesla shoppers.” 

In the U.S., competition will grow quickly with the introduction of at least a dozen new battery-powered models, she said. And while Tesla is quickly expanding sales and production in China–which it notably didn’t break out in its latest quarterly results–it faces new competition there from homegrown challengers including NIO and Xpeng. NIO in particular is moving fast with sales in China on track to reach 40,000 units in 2020, doubling from 2019.

Sales of pollution credits, including California zero-emission vehicle and U.S. CAFE credits, remain a lucrative source of revenue for Tesla as they’re generated for each electric vehicle it sells. The $401 million received in the fourth quarter boosted its annual credit sales total to $1.58 billion, more than double 2019’s haul.

(Updates to follow.)

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