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Apr 26, 2021

Tesla leaves traders wanting as stock down after profit beat

Tesla's Q1 increase in deliveries a 'paradigm changer' for electric vehicles: Wedbush's Ives

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Tesla Inc. reported a higher-than-expected seventh consecutive quarter of profit on strong demand for its top-selling Model 3 sedan but left its multiyear outlook for 50 per cent growth in deliveries unchanged.

Profit at Elon Musk’s EV company rose to 93 cents a share on an adjusted basis, the Palo Alto, California-based automaker said Monday. That beat the 80-cent average of analysts’ estimates.

The results kick off a year in which Tesla will be expanding operations on three continents, including completing new factories in Austin, Texas, and Berlin. The company indicated it expects 50 per cent annual growth in deliveries “over a multi-year horizon,” which is consistent with its previous wording.

“It’s all good, but there’s not a lot of news and it wasn’t a blowout,” said Gene Munster of Loup Ventures. “Everything happened that people thought would happen.”

Tesla fell 1.9 per cent to US$724.01 in aftermarket trading. It closed the session up 1.2 per cent to US$738.20.

Delivery Outlook Unchanged

The company delivered more than a half million cars in 2020 and reported deliveries of 184,800 cars worldwide in the first quarter, topping the last quarter of 2020 by about 4,000 vehicles. Analysts said they were looking for more detail from Tesla on a conference call scheduled for 5:30 p.m. Eastern time.

“While Tesla is committing to 50 per cent delivery growth annually, the main focus of the call will be around Tesla leaning towards 900,000 vehicles as the bogey for 2021 guidance” Dan Ives, an analyst at Wedbush Securities, wrote in a note after the earnings release but before the call.

The EV market leader faces a new wave of competition from several new models being launched this year by startups such as Amazon.com Inc.-backed Rivian Automotive Inc. and established automakers including General Motors Co. and Volkswagen AG.

Tesla sought to assure investors in its quarterly release by noting growing demand for EVs and its own efforts to rapidly expand production capacity. “As more OEMs join our mission by launching EVs, we believe consumer confidence in EVs continues to increase and more customers are willing to make the switch,” it said in a statement.

Regulatory Credit Boon

Tesla’s first-quarter revenue grew 74 per cent to US$10.39 billion in the January through March period, close to analysts’ estimates for US$10.41 billion. Sales of regulatory credits rose to US$518 million this quarter, up from US$401 million in the last quarter of 2020.

The company earns more money selling those credits to other automakers than it does from its core business of making and selling cars. That’s a potential issue for Tesla as more established carmakers start to offer their own line-up of EVs -- and may not need to buy as many credits in the future despite tightening carbon-emissions standards globally.

Tesla indicated it is getting better and more efficient at building cars. Its automotive gross margin of 26.5 per cent came in above the Bloomberg consensus of 24.2 per cent. The company attributed the boost to cost-cutting that outpaced lower average selling prices.

--With assistance from Gabrielle Coppola, Ed Ludlow and Esha Dey.