A record quarter for Tesla TSLA 1.57%
is not as fast as it seems.
Tesla announced Saturday morning that it had delivered 180,570 cars worldwide in the fourth quarter, setting a new company record. That brings the total for 2020 to just under 500,000, in line with the company’s most recent guidelines. The company also said it would soon begin supplying its China-produced Model Y crossover to customers.
While getting guidance is certainly good news, it hardly represents a sky-high operational performance that should blind Wall Street. For starters, meeting operational forecasts is a routine event for most members of the S&P 500, to which Tesla was added last month.
And investors should remember that once in 2016, Chief Executive Elon Musk claimed that Tesla would sell a million cars by 2020. Since he made that claim, Tesla’s stock has risen nearly fifteenfold. Last year also came and went without Mr Musk’s promise that he would have one million fully autonomous “robot taxis” on the road by the end of 2020, which came out.
Going back to the present, the company said it produced nearly as many cars as it 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 that the occupancy rate in the quarter was actually a fairly pedestrian 86%.
As a result of last year’s scorching rally, Tesla’s market value is close to $ 670 billion. That works out to $ 1.3 million per car sold last year, and is about seven times the combined market value of Ford and General Motors..
Still, Tesla has a miniscule share of the global car market and competition for electric cars is starting to heat up. To justify the price tag on the stock, Tesla would have to blow past its own forecasts, not just to hit them.
In addition, the little profit Tesla makes is greatly flattered by the sale of legal credits to help rivals meet emissions commitments. While fourth-quarter numbers won’t be released until Tesla releases full financial results, Tesla posted $ 1.3 billion in such sales in the previous four quarters, with a 100% profit margin. That source of profit could wither as more electric competition from older automakers comes online, which could mean fewer buyers for the credits.
These concerns are no problem for shareholders who are making huge profits. But recent history does offer a caveat: Tesla’s market value has halved twice since 2018, in two installments. If that were to happen, the stock would still be valued at about 700 times lagging earnings. Leaders in the auto industry have traditionally been lucky enough to earn a 10 times profit rating.
Mr. Musk wisely decided to sell $ 10 billion worth of stock last year amid the furious rally. For average investors, it is probably a good idea to follow suit.
Write to Charley Grant at [email protected]
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