A fourth record for Tesla TSLA 1.57%
it’s not as fast as it sounds.
Tesla announced Saturday morning that it delivered 180,570 cars worldwide during the fourth quarter, setting a new company record. That brings the 2020 total to 500,000, in line with the company’s latest guidelines. The company also said it would soon begin delivering customers its China-made Model Y crossover vehicle.
While hitting the guide is certainly good news, it hardly represents an imposing operational feat that should dazzle Wall Street. For starters, meeting operating forecasts is a common occurrence for most members of the S&P 500, to which Tesla was added last month.
And investors shouldn’t forget that chief executive Elon Musk once claimed in 2016 that Tesla would sell one million cars by 2020. Since he made that claim, Tesla’s shares have multiplied nearly fifteenfold. . Last year also came and went without Mr Musk’s promise of a million fully autonomous “robotaxis” on the roads coming to fruition by the end of 2020.
Returning to the present, the company said it produced almost as many cars as delivered to customers in the fourth quarter. But in October, Tesla said it had installed enough production capacity to make 210,000 in the quarter, suggesting the capacity utilization rate in the quarter was in fact 86% pedestrian.
As a result of last year’s torrid rally, Tesla’s market value stands at nearly $ 670 billion. That amounts to $ 1.3 million per car sold last year, and is approximately seven times the combined market value of Ford and General Motors..
Still, Tesla has a minimal share of the global car market and competition from electric cars is starting to heat up. To justify the stock price, Tesla would have to exceed its own forecasts, not just meet them.
In addition, the low profit Tesla makes is greatly flattered by the sale of regulatory credits to help rivals meet emission mandates. While the fourth-quarter count won’t be revealed until Tesla delivers full financial results, Tesla has posted $ 1.3 billion in sales over the previous four quarters, which have a 100% profit margin. This source of profits may disappear as there is more electricity competition from legacy carmakers, which could mean fewer buyers for the credits.
These concerns do not bother shareholders who are making big profits. But recent history offers a warning: Tesla’s market value has halved twice, in two episodes since 2018. If that happened, the shares would be valued at about 700 times after earnings. Historically, automotive industry leaders have been fortunate to get a tenfold profit rating.
Mr Musk prudently decided to sell $ 10 billion in shares last year amid the furious rally. For average investors, it is probably a good idea to follow suit.
Write to Charley Grant to [email protected]
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