By Claudia Assis, MarketWatch
Tesla Inc. stock rallied 12% late Wednesday after the Silicon Valley car maker reported quarterly earnings that topped Wall Street views and set a goal to “comfortably” sell more than 500,000 vehicles this year.
Tesla (NAS:TSLA) said it earned $105 million, or 56 cents a share, in the fourth quarter, compared with $140 million, or 78 cents a share, in the year-ago quarter. Adjusted for one-time items, the company earned $2.14 a share, compared with $2 a share a year ago.
Revenue rose 2% to $7.4 billion, compared with $7.2 billion a year ago.
Analysts polled by FactSet had expected the car maker to report adjusted earnings of $1.77 a share on sales of $7 billion.
The after-hours share surge continued as Tesla hosted its conference call with investors, and a mention of potential delays in the Model 3 production in Shanghai due to the deadly coronavirus did nothing to temper investors’ enthusiasm.
Tesla Chief Financial Officer Zach Kirkhorn said during the call that Tesla is expecting “a one- to one-and-a-half-week delay in the ramp of Shanghai-built Model 3 due to a government-required factory shutdown” related to the virus.
“This may slightly impact profitability for the quarter, but is limited, as the profit contribution from Model 3 Shanghai remains in the early stages,” he said. “We are also closely monitoring whether there will be interruptions in the supply chain for cars built in Fremont [Calif.],” but Tesla so far is not aware of anything material, Kirkhorn said.
Tesla delivered “a potentially ‘game changing’ (fourth quarter) with strong profitability and healthy cash flow signaling what could be a new era for (Chief Executive Elon Musk) and Fremont going forward,” analyst Dan Ives of Wedbush said in a note after the results.
The quarterly performance was “impressive, with clear momentum looking ahead as a global inflection in EV demand appears on the horizon,” he said. Tesla’s “bull party” is likely to continue, Ives said.
Others were not that convinced. Despite the after-hours rally, “we continue to see risks related to the China factory ramp-up, as well as rising EV competition from auto makers still eligible for the full federal tax credit in the U.S.,” said Garrett Nelson, an analyst with CFRA.
“Tesla also did not provide detail regarding capex related to its new factory in Germany. We view the stock’s current risk/reward as unfavorable at current levels and maintain a sell,” Nelson said.
In the call, Tesla said it would provide more details about its capex in later securities filings.
The company said the production ramp of its Model Y, a compact SUV, started this month ahead of schedule. The Model Y production ramp will be gradual as the company will install additional machinery in its Fremont plant, it said.
And thanks to the Model 3 production ramp at its Shanghai plant, “production will likely outpace deliveries this year.” Tesla said it expects production out of its future Berlin factory, serving European markets, to begin in 2021.
Tesla said it expects positive quarterly cash flow going forward, “with possible temporary exceptions.”
“We continue to believe our business has grown to the point of being self-funding,” Tesla said in its letter to investors.
Tesla also called for GAAP profitability going forward. “Continuous volume growth, capacity expansion, and cash generation remain the main focus,” it said in the letter.
Tesla delivered 367,500 vehicles in 2019, up 50% from a year ago, and in line with its guidance range of 360,000 to 400,000 vehicles. The 2020 delivery guidance represents a 36% increase over the 2019 deliveries.
Going into earnings day, analysts had worried Tesla would need a large beat in order to not disappoint investors.
And the 2020 sales guidance was “mind-blowing,” said Argus Research analyst Bill Selesky. “Comfortable above 500,000 units (is) a great thing to hear,” he said. “Keep in mind that when consumers think EV, they automatically think Tesla.”
In the analyst call, Musk said the company is likely to showcase its latest battery technologies and partnerships on a “battery day,” probably in April.
“We are in deep,” Musk said about Tesla’s battery knowledge. “We know a lot about batteries. Wow. Next level,” he said.
Musk sounded a little impatient with one analyst who inquired about a potential capital raise to pay down debt or fuel acquisitions, and earlier in the call said that retail investors have “deeper and more accurate insights than many of the larger institutional investors and analysts.”
The stock has been on a tear since mid-December, hitting a string of records that have pushed the company’s valuation above $100 billion, which is more than Ford Motor Co.’s valuation at its peak in 1999.
The shares ended at a record Wednesday, their 16th since Dec. 18.
Tesla shares have gained about 94% in the past 12 months, far outpacing advances of 25% and 18% for the S&P 500 index (S&P:SPX) and the Dow Jones Industrial Average (DOW:DJIA) .