Tesla Reports Its Fourth Quarter of Profits in A Row

Tesla (TSLA) reported its second-quarter earnings on Wednesday after market close. The earnings report was much anticipated as there had been a lot of speculations about the results. Expectations were high after Tesla reported that it delivered 90,650 units in the last three months compared to the 72,000 units analysts were expecting.

The automaker’s earnings report beat Wall Street’s expectations which also meant a four-quarters in a row profit for Tesla. For the second quarter, the company reported a net income of $110 million and a net profit of $104 million, which the company refers to as a “fundamental operational improvement”. The company’s revenue was down 4.9% from a year ago at $6.04 billion, but still beat analysts’ estimates of $5.37 billion.

Shares of Tesla rose by 5% a few hours after the Q2 earnings were reported. The results of the second-quarter earnings report completed Tesla’s first full year of profitability based on the GAAP, making Tesla eligible for inclusion on the S&P 500 index. An inclusion in the S&P index would increase its access to institutional investors.

“I’ve never been more optimistic or excited about the future of Tesla” said Elon Musk on a conference call with investors.

Here’s a breakdown of Tesla’s performance in the just reported quarter compared to estimates put together by Refinitv:

·        Earnings: $2.18 (ex-items) vs 3 cents per share, expected

·        Revenue: $6.04 billion vs. $5.37 billion, expected

·        Net income: $104 million (GAAP)

Plans for the Tesla Plant in Austin, Texas. 

The company also announced that it will build its next factory near Austin, during its earnings call on Wednesday. There are also plans of dedicating Tesla’s Fremont, California, car plant to the production selected models: The Model S and Model X vehicles to be produced for all markets, and the Model 3 and Model Y to be produced for the Western half of North America. While the Texas factory will be dedicated to the production of Tesla’s Cybertruck, Semi, and Model 3 and Model Y vehicles for the Eastern half of North America, according to Musk.

“Tesla’s Gigafactory Texas will keep the Texas economy the strongest in the nation and will create thousands of jobs for the hard-working Texans,” said Texas state governor Greg Abbott in a statement. Prior to Tesla’s plan to plant its new Gigafactory in Texas, Texas and Tulsa, Oklahoma had competed to lure the factory. Texas eventually won after Travis county officials agreed in a vote to give Tesla at least $14.7 million in tax breaks, earlier this month.

Following Tesla’s performance in the second quarter, Wedbush analyst Daniel Ives commended the automaker, saying it had “executed flawlessly” this quarter regardless of the global economic decline due to the coronavirus pandemic, especially as a good percentage of the company’s success is linked to China.

Another analyst, Nicholas Hyett of Hargreaves Lansdown also commended the company’s performance and attributed its success to “increasing sales in China, which look to be relatively higher margin thanks to the lower manufacturing costs, and increased recognition of software revenues.”