Already up 25% year to date, shares of Tesla (TSLA) have erased doubt that the company, after posting 650% returns in 2020, can delivery the same rate of return 2021. Tesla's strong stock surge has been driven by its impressive fourth quarter delivery totals for its flagship vehicles which not only suggests strong product demand but also solid execution.
The luxury electric car manufacturer is set to report fourth quarter fiscal 2020 earnings results after the closing bell Wednesday. While skeptics continue to scoff at the stock’s high valuation, Tesla’s focus has been on executing it strategy. With four double beats (top and bottom line) in row, few companies have executed better over the past year, including its reported Q4 deliveries of 180,570 for and delivered 499,550 vehicles for 2020. And there are no signs of slowing down, evidenced by the company’s vehicle registrations in California which jump nearly 63% year over year in Q4.
But will the registrations turn to actual deliveries? Can can the deliveries sustain that growth throughout the year? That won’t be a problem, according to Wedbush Securities Dan Ives who has a bull case price target of $1,250 on Tesla, thinks Tesla has a strong setup aided by electric vehicles momentum.
"There has been a massive appetite in the market for EV stocks led by Tesla over the past year as the demand trajectory for the EV sector continues to move markedly higher,” Ives noted. In other words, Tesla will have to keep its foot on the gas pedal to steer where the stock is going next.
In the three months that ended December, Wall Street expects Tesla to earn $1.00 per share on revenue of $10.32 billion. This compares to the year-ago quarter when earnings came to 41 cents per share on revenue of $7.38 billion. For the full year, the company is expected to earn $2.38 per share, compared to earnings of 4 cents a year ago, while full-year revenue of $30.97 billion would rise 26% year over year.
While many pundits continue to insist on relegating the company to just an auto-manufacturer in the realm of Ford (F) or General Motors (GM), the company’s growth trajectory and its diverse product portfolio, which — aside from electric vehicles — includes batteries, software, solar roof/panels, suggests Tesla is more than a one-trick pony and should be viewed as sustainable energy company. These collective business have driven the quarterly earnings beats referenced above.
In the third quarter, the company beat on both the top and bottom lines, reporting $8.77 billion in revenues, topping the $8.36 billion the Street was looking for. Of that total, Automotive revenue was $7.6 billion, accounting for roughly 91% of the total for the quarter. When excluding regulatory credits, Automotive gross margins rose five percentage points sequentially to 23.7% from 18.7%. This underscores the strong profitability and costs control measures Tesla has undertaken. Regulatory credits contributed $397 million during the quarter.
To be sure, these figures, including the company’s Q4 delivery totals, were inline with expectations. To say it another way, the stock had assumed that level of performance. On Wednesday, however, expectations will be much higher. Estimates suggests the company will target 2021 delivery totals of around 800,000 vehicles, which represents a 60% increase from 2020. Will that be enough to sustain the stock’s momentum?
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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