The stock entered earnings down 4.9% for the past 5 days, but up 54% since early August. At just under 10 times enterprise value-to-sales, the valuation was not necessarily unreasonable for a growth stock heading into earnings.
After earnings, the stock only rose about 2.3% to $432 a a share.
Here were the results against expectations:
- Revenue: $8.77B v. $8.3B (Actual result: +39% year-over-year)
- Deliveries: 139.5 K v. 140K (+44%)
- Operating Margin: 9.2% v. 7.7% (+508 basis points)
- Earnings Per Share: 76 cents v. 56 cents (+105%)
- Free Cash Flow: $1.39B v. $919M (+276%) ‘
The robust delivery growth, as expected, saw revenue through while the average selling price dipped a bit as Tesla focuses on selling more affordable vehicles. One positive enabling the strong profitability was that the company is seeing costs related to new investments in manufacturing plants in China abate.
Going forward on the revenue side, Tesla is looking to compete in an increasingly competitive China market. Tesla said it lowered prices on its Model 3 in China, making the make one of the lowest cost premium vehicles in the country.
In Tesla’s guidance, management said it is still on track to delivery about 500,000 vehicles for all of 2020. The company said it remains on track to begin deliveries for the Model Y from new manufacturing plants in progress in Texas, China and Germany.
"The company importantly reiterated its goal of 500k delivery vehicles for the year which will be a major focus on the call later tonight as well as China strength and demand in this key region,” wrote Wedbsh Securities analyst Dan Ives in a note after the earnings. China is a key growth market for electric vehicles.
Investors are watchful of increased competition putting pressure on price, which pressures gross margins. And on an earnings basis, the valuation is quite expensive.
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