Tesla reports fourth consecutive quarter of profit, is now eligible to join S&P 500

Tesla can’t seem to take a wrong turn these days—the company announced a second-quarter profit that sent the stock price soaring, and cleared the way for the California carmaker to be added to the S&P 500 stock index. Tesla has now been profitable for a full year on a GAAP basis, which is one of the criteria for inclusion in the S&P 500—an honor that will almost certainly lead to more stock-market gains.

The company reported revenue of $6.04 billion, and earnings per share of $2.18 (non-GAAP) or $0.50 (GAAP). Was this a better-than-expected result, or as stock analysts call it, a “beat?” Like so many conventional metrics, the concept hardly applies to Tesla. Analyst estimates were, as usual, all over the map—some were expecting a loss of over two bucks per share, some predicted a profit of a dollar or more—and anyway, TSLA doesn’t always move in the expected direction after an earnings announcement. However, the bottom line is that this fourth profitable quarter in a row is extremely good news, and the stock soared in after-hours trading.

Automotive gross margin (the amount the company earns on each vehicle sold) was 25.4% (about 17% excluding ZEV credits)—that’s basically unchanged from the previous quarter, but it’s significantly higher than the 18.9% of Q2 2019, and the overall trend definitely seems to be upward. Tesla improved its cash position to 8.6 billion bucks. These two metrics are very important for a company in Tesla’s position—it will need plenty of income, and plenty of cash, to finance its ambitious plans for new models and new factories.

On the earnings conference call, Elon Musk announced that Tesla will build its next factory near Austin, Texas. Eventually, the Fremont plant will be building all Model S and Model X vehicles, and Models 3 and Y for the Western half of North America. The Texas Terafactory will produce the new Cybertruck, the Tesla Semi, and Model 3 and Y vehicles for the Eastern half of North America.

As usual, there’s a number of nuggets of news in the report for Tesla-watchers to dissect over the next few days. Model Y production is now “running at installed capacity,” and Tesla notes that the Model Y production ramp-up was “significantly faster than our initial Model 3 ramp, which took over nine months to reach the same weekly rate.” Tesla is getting better at meeting its forecasted timelines—in fact, it’s getting damn fast.

New machinery at the Fremont Factory is expected to increase total Model 3/Model Y capacity from 400,000 to 500,000 units per year. Despite the brief setbacks due to the corona-caused shutdown, Tesla still hopes to deliver half a million vehicles in 2020.

There’s encouraging news on the solar and energy storage fronts, too. Megapack generated a profit for the first time in Q2, and the Autobidder energy trading platform is now operating on the European Power Exchange, in addition to exchanges in the US and Australia. Things may even be looking up for the Solar Roof—installations roughly tripled in Q2 compared to Q1.

 

Sources: Tesla, CNBC, Barron’s