Tesla Surprises Analysts with a Profit in Q1

April 30, 2020
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The earnings season is in full swing, and all eyes are on Tesla Inc. (NASDAQ: TSLA) this week. The electric vehicle manufacturer, which has recently expanded with a factory in China, has surprised analysts with a positive earnings report.

The company has had a rocky history with Wall Street, with one of the most shorted stocks on the market. The latest data has created new confidence, and the stock was up at the closing bell on Wednesday.

Tesla’s Earnings in Detail

Both sales and earnings were up at Tesla in the first quarter of 2020.

  • Earnings were reported at $16 million, equivalent to $0.09 per share. This compares favorably with the loss of -$4.10 per share that was reported in the same period a year ago.
  • Sales revenue was reported at $5.985 billion, compared to $4.5 billion a year ago.
  • The company reported $1.8 billion in cash and equivalents for the end of the quarter.

There are plenty of positives to take from this news. The company’s gross margin grew to 25.5% in the automotive division, compared to 20.2% at this time last year. The company benefitted from $354 million in regulatory credits, which was an increase of 64%.

Earnings were made possible by significant reductions in operating expenses. Its new Chinese factory has allowed it to sell in the world’s largest electric vehicle market without import tariffs. It is expanding on this practice with plans to construct a factory in Germany, giving it tariff-free access to the European market.

Trouble in the Next Quarter?

While China is slowly easing its Coronavirus lockdown restrictions, the U.S. and Europe are still largely affected. Q2 earnings are likely to be less impressive as the full impact of slowdown is likely to be felt.

Even so, the fact that Tesla was able to deliver 88,400 vehicles in the first quarter is still positive. 103,000 vehicles were produced, which puts the company in a good position to meet demand.

It’s unknown at this time when U.S. factories will reopen.

Is This Still a Strong Stock Pick?

Tesla stock has grown 91.63% in the year to date and closed with an 8.72% gain in after-hours trading on Wednesday. It is vastly outperforming its target price, creating huge gains for investors who purchased the stock close to its 52-week low of $176.99.

While the short term upside is doubtful (stock could fall later this year if Q2 figures disappoint), this pick is still compelling as a long term investment for the electric vehicle market.

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