Tesla extends profit margin, promises record production and increases inventory by 13%

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Tesla Inc achieved its second consecutive quarterly profit on record deliveries of vehicles on Wednesday, announcing that it will ship more than 500,000 units this year as electric car maker stocks hit new highs.

Stocks rose 13% after hours to $ 654, hit an all-time high and hit the $ 600 mark for the first time. Tesla announced on Wednesday that the manufacturing process at its new Shanghai facility was proceeding as expected, and production of its mass market model 3 would increase due to strong demand in China.

The company also announced that it has started production of its new Model Y, an electric crossover utility vehicle, at its Fremont, California facility this month and plans to deliver the first models early by the end of March.

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Overall, investors are counting on Tesla to overcome its production, legal, and management problems and to lead the industry in technological innovations for the next generation of cars.

Investor appetite is also a blessing for Tesla's Elon Musk, CEO of Tesla, who was forced to step down as chairman after a series of scandals and investor doubts about Tesla's ability to cope with competition from larger, better-capitalized global competitors ,

Tesla said that deliveries of 500,000 vehicles should be "significantly exceeded" in 2020, up from 367,500 in the previous year.

Ultimately, cost efficiency and high production volumes should make it possible to achieve an industry-leading operating margin, the company said. An operating margin of 4.9% was reported in the fourth quarter.

"The point at which Tesla already started model Y production in Fremont was the most notable point in the release. For a company that has always been late, this is a huge improvement. First, a model Y ramp was launched by Examined and then drawn at the end of 2020 "We're looking forward to the summer and now have production in the first quarter of 20," wrote Roth Capital Partners analyst Craig Irwin in a note.

The cost efficiency of the company can be seen when comparing sales and profits per vehicle. A review of Tesla's results showed that while sales per unit shipped in the fourth quarter only increased 3% sequentially, operating profit per vehicle increased 19% at the same time.

Tesla's stock has more than doubled since the company made a profit in the third quarter, surpassing vehicle delivery estimates in 2019, and ramping up production at its Chinese Gigafactory.

The recent rally valued the company at more than $ 104 billion, and some analysts questioned the reasons.

"It has a fantastic brand, impressive production capacity and (in any case) a fabulous product. But it's really worth more than Volkswagen," said Nicholas Hyett, analyst at Hargreaves Lansdown.

Last week, Tesla overtook the German company as the second largest automaker after the Japanese Toyota Motor Corp.

Volkswagen produced almost 11 million vehicles in 2018 and generated an operating profit of 13.92 billion euros in the same year.

As China tries to curb a rapidly spreading corona virus, Tesla anticipates a one and a half week delay in launching the Shanghai-built Model 3 due to a government-mandated factory closure.

Model Y production in California and the start-up in Shanghai are likely to "temporarily impact margins".

Pressure on the stack of money

Supported by strong demand for vehicles in Europe and China, Tesla announced on Wednesday that cash on hand had increased to $ 6.3 billion.

In the last three months of 2019, total cost of ownership increased less than 1% to $ 1.03 billion.

At the same time, Tesla's debt remains unchanged at $ 13.42 billion at the end of 2019. (Graphic: https://fingfx.thomsonreuters.com/gfx/mkt/13/1578/1553/TESLA. Jpg)

The company has tried to keep costs under control, but so should new initiatives, including the construction of its first European plant in Germany, an electric pick-up, a new generation of the Tesla Roadster, and automated driving functions burden the money stack.

Fourth-quarter Tesla results are only the fifth profitable quarter since the company started publishing its financial results after its IPO in 2010.

The company's financial results have fluctuated significantly in the past, and many investors remain skeptical that Tesla can generate profit, cash flow, and growth in the long term.

Tesla also lags behind the competition of luxury car manufacturers with its constant earnings per vehicle. This metric is closely monitored by auto professionals to compare companies across the industry.

Net income attributable to common shareholders declined in the three months ended December 31, from $ 140 million, or 78 cents a share, a year earlier to $ 105 million, or 56 cents a share.

Without an article, Tesla earned $ 2.06 per share. According to Refinitiv IBES data, analysts expected earnings of $ 1.72 per share.

Revenue increased from $ 7.23 billion in the previous year to $ 7.38 billion. Analysts had expected sales of $ 7.02 billion.