Tesla beats expectations in Q3 2020 results

Tesla released financial results for the 2020 third quarter after Wednesday’s closing bell, beating analysts’ expectations on EPS and revenue. The EV maker reported its fifth consecutive quarter of profits, causing its shares to jump 5% in premarket trading on Thursday.

Here’s how Tesla performed in the third quarter compared to analysts’ expectations as compiled by Refinitiv:

·        Earnings per share (adjusted): 76 cents per share, vs analysts’ 57 cents per share

·        Revenue: $8.77 billion, vs analysts’ $8.36 billion

·        Net income (GAAP): $331 million, vs analysts’ $394 million

The automaker said it had a total delivery of 139,300 vehicles in the third quarter, setting a new record for Tesla. Analysts had high expectations for Tesla after it confirmed its new record deliveries earlier this month.

“The third quarter of 2020 was a record quarter on many levels. Over the past four quarters, we generated over $1.9B of free cash flow while spending $2.4B on new production capacity, service centers, Supercharging locations, and other capital investments. While we took additional SBC expense in Q3, our GAAP operating margin reached 9.2%,” the company reported in a letter to shareholders.

In addition to its record-breaking results, Tesla closed the quarter with a $14.5 billion cash position in the bank, setting a new record. The Q3 results have also enabled Tesla to achieve a 6.3% operating margin over the last year.

“For the trailing 12 months, we achieved an operating margin of 6.3%. We expect our operating margin will continue to grow over time, ultimately reaching industry-leading levels with capacity expansion and localization plans under way,” the letter carried.

According to the company’s report, its automotive unit generated $7.6 billion, 91% of the total revenue for the quarter. Automotive gross margins, with the exclusion of regulatory credits, rose to 23.7% from 18.7%. The EV maker made $397 million in regulatory credits in the third quarter, almost double what it made a year ago.

Tesla’s operating expenses were $1.25 billion, up 33% from last quarter as the company took up new building projects of factories in Austin, Texas, and Brandenburg, Germany, among other expenses.

“I should make a point that for Berlin and Austin, we do expect to start delivering cars from those factories next year but because of the exponential nature of the spool up of manufacturing plants especially one with new technology, we’ll start off very slow at first and then become very large,” said Elon Musk, Tesla CEO.

Musk also alerted investors that it could last between 12 and 24 months before these factories hit full capacity after they begin operations. The company, previously, had plans on ground to start production at the Berlin factory by July next year.