A record quarter for the Tesla TSLA 1.57%
it’s not as fast as it sounds.
Tesla announced on Saturday morning that it delivered 180,570 cars worldwide in the fourth quarter, setting a new company record. This brings the total amount from 2020 to just 500,000, according to the company’s latest guidelines. The company also said it will soon begin delivering its Model Y crossover vehicle produced in China to customers.
While hitting the guide is certainly good news, it is hardly a towering bankruptcy opera that should amaze Wall Street. For starters, meeting operational expectations is a routine event for most S&P 500 members, to which Tesla was added last month.
And investors should not forget that CEO Elon Musk once claimed in 2016 that Tesla will sell one million cars by 2020. Since making this request, Tesla shares have rallied nearly fifteen times. Last year he came and went without Mr Musk’s promise that a million fully autonomous “robot taxis” on the roads by the end of 2020 would be made.
Returning to the present, the company stated that it produced almost as many cars as it delivered to customers in the fourth quarter. But in October, Tesla said it installed enough production capacity to make 210,000 in that quarter, suggesting that the capacity utilization rate in that quarter was actually a 86% pedestrian.
Following last year’s torrid rally, Tesla’s market value stands at nearly $ 670 billion. It stands at $ 1.3 million per car sold last year and is about seven times higher than the combined market values of Ford and General Motors..
However, Tesla has a tiny share of the global car market, and competition from electric cars is starting to heat up. To justify the stock price, Tesla should go over its own forecasts, not just meet them.
In addition, Tesla’s low profit is greatly flattered by sales of regulatory credits to help rivals meet emissions mandates. While the fourth quarterly report will not be disclosed until Tesla announces full financial results, Tesla recorded $ 1.3 billion in such sales in the previous four quarters, which have a 100% profit margin. This source of profit could wither as electricity competition from older car manufacturers increases, which could mean fewer buyers for credit.
These concerns do not bother shareholders who make huge gains. But recent history warns: Tesla’s market value has been halved twice in two episodes in 2018. If that happened, the shares would still be valued at about 700 times later earnings. Leaders in the automotive industry have historically been fortunate enough to get a 10-fold earnings rating.
Mr. Musk wisely decided to sell $ 10 billion worth of shares last year amid the furious rally. For ordinary investors, it is probably a good idea to follow suit.
Write to Charley Grant at [email protected]
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