Tesla disappoints Wall Street despite strong profits

Tesla capped its breakout year with a record profit that still fell short of analysts forecasts, sending its shares lower in after-hours trading.

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.

“2020 was a defining year for us on many levels,” said CEO Elon Musk. “Despite a challenging environment…we delivered almost as many cars last year as we produced in our entire history.”

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 are scrambling to shift production from traditional gasoline powered cars to electric vehicles.

Tesla is in the process of developing a pickup truck, called the Cybertruck, as well as an electric semi-truck. Musk said Wednesday that if the company is “lucky” it could have deliveries of a small number of Cybertrucks by the end of 2021, but that he expects its rollout will primarily take place in 2022.

And Musk said the main reason it hasn’t already started production of the Tesla Semi is because it doesn’t have the battery capacity.

“If we were to make the Semi like right now … we would not have enough [battery] cells,” he said. “The Semi would use typically five times the number of cells that car would use, but it would not sell for five times what a car would sell for. So it kind of doesn’t …. make sense for us to do the Semi right now, but it will absolutely make sense for us to do it as soon as we can address the cell production constraint.”

Musk, who recently became the richest person in the world due to the performance of Tesla shares, did entertain a question about when he might consider leaving Tesla. In addition to being CEO of Tesla he is also CEO of commercial space flight company SpaceX.

“No one should be CEO forever. The amount of work entailed in being CEO of Tesla is insane,” he said. “It would be nice to have a bit more free time on my hands.”

But he also said there is much work to be done to achieve Tesla’s primary goal of shifting the world from fossil fuels to renewable clean energy, and said he therefore doesn’t foresee leaving Tesla anytime soon.

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 fell about 5% 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 22% 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.