/GettyImages-597435890-9732e29441ce4a46b48e47b367bc4d89.jpg "What to look for in the TSLA")
Main advantages
- Analysts estimate adjusted EPS of $ 1.15 against $ 0.41 in the fourth quarter of 2019.
- Vehicle deliveries recorded robust growth in the previous year.
- Vehicle sales continue to expand despite the weak economy due to the COVID-19 pandemic.
Tesla Inc. (TSLA), the electric car maker, is coming out of a revolutionary year in which it posted a fifth consecutive quarter of profitability for the first time, joined the S&P 500 and became the most valuable automaker in the world when the price of his actions skyrocketed. It also made CEO Elon Musk the richest man on the planet.But despite this success, Tesla’s global market share remains miniscule, its sales are minimal compared to those of the largest automakers, and skeptics say Tesla’s shares are drastically overpriced. Its price / earnings ratio is 1,616 times earnings.
Given this high valuation, investors will be looking for solid financial results when Tesla reports earnings on January 27, 2021 for the fourth quarter of fiscal 2020.Analysts are expecting a significant increase in adjusted earnings per share (EPS) on strong revenue growth compared to the previous year’s quarter.
Another key metric of interest to investors is Tesla’s vehicle deliveries, whose results for the fourth quarter were released earlier this month. The number of vehicles the electric carmaker delivered during the fourth quarter increased dramatically compared to the same quarter last year.
Tesla’s stock soared in 2020. The stock’s top performance last year was briefly interrupted by the pandemic-induced market crash between late February and late March 2020 and a significant retraction between late August and early of September. But that did not stop Tesla’s shares from posting a total return of 672.1% in the past 12 months, well above the S&P 500’s total return of 16.0%.
Source: TradingView.
A stock driver was Tesla’s success in posting more consistent earnings after years of uneven earnings performance. Adjusted earnings per share increased 105.2% in the third quarter of fiscal 2020, marking the fifth consecutive quarter of profitability. Revenue grew 39.2%, its sharpest increase since the second quarter of 2019.Tesla noted that revenue growth was mainly driven by substantial increases in vehicle deliveries, as well as growth elsewhere in its businesses.
The results for the second quarter of fiscal 2020 were mixed. Revenue fell 4.9%, which is only the second quarter of a decline in revenue in at least 15 quarters. However, Tesla recorded positive adjusted EPS compared to an adjusted loss per share in the previous year’s quarter.To be sure, Tesla’s positive second-quarter earnings were not fueled by strong operating results. Instead, they were driven by sales of zero-emission regulatory credits to other automakers, who need those credits to avoid penalties.Analysts had expected Tesla to post a loss in the second quarter of fiscal 2020.
The second quarter also marked the fourth consecutive quarter of positive GAAP earnings for Tesla, which qualified the company’s shares for inclusion in the S&P 500.Originally deprecated for inclusion in September, Tesla ended up being added to the broad market index in December.
Analysts expect Tesla’s profitability to continue into the fourth quarter of fiscal 2020. Adjusted EPS is expected to increase 178.8% and revenue is expected to grow 44.5% compared to the same three-month period last year. For fiscal 2020, analysts expect adjusted earnings per share to rise 6,330.8% as annual revenue increases 28.3%.
| Tesla Key Metrics | |||
|---|---|---|---|
| Q4 2020 (FY) | Fourth quarter of 2019 (fiscal year) | Fourth quarter of 2018 (fiscal year) | |
| Adjusted earnings per share ($) | 1.15 (estimate) | 0.41 | 0.39 |
| Revenue ($ B) | 10.7 (estimate) | 7.4 | 7.2 |
| Vehicle deliveries (K) | 180.6 (real) | 110.7 | 89.5 |
Source: Visible Alpha; Tesla.
As mentioned above, investors are also interested in deliveries of Tesla vehicles. Tesla’s main business is making electric cars and it needs to continue expanding production to increase revenue and profits. The electric car maker has made several major acquisitions in recent years, including Germany’s Grohmann Engineering GmbH and Perbix Machine Co. Inc., in order to increase its efficiency and manufacturing capacity. Increasing production efficiency and capacity is important to justify Tesla’s high rating. And while it may currently lead the electric vehicle market, other automakers are acting aggressively to challenge Tesla’s dominance.
So far, Tesla has been able to continuously expand vehicle deliveries, excluding the second quarter of fiscal 2020, when deliveries fell 4.3% amid the pandemic.Vehicle deliveries for Q4 FY 2020, which have already been reported, increased 63.1% year-on-year (YOY) after an increase of 44.1% YOY in Q3 FY 2020. The increase in the fourth quarter marked the fastest pace of growth since the second quarter of 2019. For fiscal 2020, Tesla delivered a total of 499,550 vehicles at an annual rate of 35.9%.While this pace of growth is impressive for most companies, it can be a wake-up call for Tesla and its investors. The 2020 growth rate was the slowest for annual vehicle deliveries since fiscal 2017 and the second slowest growth in six years.