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A crossed obstacle that still leaves Tesla's stock in a funny way

A crossed obstacle that still leaves Tesla’s stock in a funny way

A record quarter for


TSLA 1.57%

Not as fast as it seems.

On Saturday morning, Tesla announced that it had delivered 180,570 vehicles worldwide in the fourth quarter, setting a new record for the company. Who collects The total for 2020 is only 500,000This is in line with the company’s latest directives. The company also said it will soon start delivering its China-produced Y crossover to customers.

While striking is certainly good news, it is not a major operational achievement that should dazzle Wall Street. For starters, meeting operational expectations is a routine occurrence for most S&P 500 members, which Tesla was added to last month.

Investors must not forget that CEO

Elon Musk

He once claimed in 2016 that Tesla will sell 1 million cars by 2020. Since he made this claim, Tesla’s stock has risen nearly fifteen times. Last year also came and went without Mr. Musk’s promise to provide 1 million fully autonomous robotics on the road by the end of 2020.

Returning to the present, the company said it produced nearly as many cars as delivered to customers in the fourth quarter. But in October, Tesla said it had installed enough capacity to produce 210,000 per quarter, indicating that the capacity utilization rate in that quarter was actually 86% for pedestrians.

As a result of last year’s rally, Tesla’s market cap was around $ 670 billion. This amounts to $ 1.3 million for every car sold last year, about seven times the combined market value of the


And the

General Motors.

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However, Tesla has a small share in the global auto market, and is an electric car rival It began to heat up. To justify the stock price, Tesla must exceed its own expectations, not just meet them.

Moreover, Tesla’s meager profit is very satisfied by sales of regulatory credits to help competitors meet emissions requirements. While the fourth quarter tally will not be revealed until Tesla announces full financial results, Tesla has booked $ 1.3 billion in such sales over the four quarters prior to that, which carries a 100% profit margin. This source of profit may fade as more electrical competition from old carmakers emerges online, which could mean fewer buyers for credits.

These concerns are not bothering shareholders who are sitting on huge gains. But recent history offers a caveat: Tesla’s market value has been cut in half twice, in two episodes since 2018. If that happens, the shares will still be worth around 700 times subsequent earnings. Historically, leaders of the auto industry have been fortunate to value their earnings tenfold.

Mr Musk wisely decided to sell $ 10 billion of the new company’s shares last year amid the furious rally. For ordinary investors, they are likely to follow suit.

Write to Charlie Grant at [email protected]

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