In an age where the costs of oil continue to be in a state of limbo, the Tesla Company continues to defy analyst projections that expected lower oil costs to deal a blow to the business of selling electric vehicles (EVs). For the fourth quarter in a row, Tesla hit a milestone that outdid both top-line and bottom-line anticipations. Better yet, the EVs maker has topped the Wall Street delivery estimates and registered record earnings as it continues to usher the world into an emission-free era through its vehicles.
The company recorded third-quarter revenue of more than $8 billion, which is an impressive 39% year-over-year growth, effectively beating Wall Street projections by a cool $460 million. Like the slots online when the online casino industry was just getting started back in the 2000s, Tesla’s keep proving again and again that we are entering into a new era tech revolution in the vehicle industry.
If you were a non-believer when it comes to EVs, then you should take a look at what we expect from Tesla in 2021 and beyond, and you’ll understand the EVs market potential.
Tesla Earnings Will Continue Growing Next Year
For the third quarter of this year, Tesla reported that it manufactured 145,036 cars, 50% more than the same period last year, and distributed 139,593 cars, a figure that’s 44% higher than Q3 2019. Moreover, the company is poised to hit its 500,000 car-distribution targets for the entire year, beating Wall Street’s estimation of 476,000.
By the same token, Tesla’s productivity metrics were remarkable as their operating income got better, rising to a record level of $809 million. The gross profit margin for electric motor-powered cars rose to 27.7% compared to 25.4% for the second quarter and 22.8% one year back.
What’s even more impressive is the fact that the company realized these outstanding milestones, even though it took a rather large hit in the form of stock-based reparation for CEO Elon Musk after accomplishing numerous achievements, such as the considerable rise in share market capitalization. By September, Musk’s net worth hit over 100 billion dollars in the wake of the automaker’s massive stock surge.
Q3 2020 is the fifth consecutive quarter that the EV maker has registered positive growth in GAAP (generally accepted accounting principle) net revenue. We expect this momentum to maintain the same trend next year and perhaps even the years to come as the world continues embracing electric vehicles.
Tesla Is on Right Track to Deliver 1 Million EVs in 2021
According to its latest stakeholder briefing, Tesla disclosed that its California factory at Fremont could mass-produce 90,000 units of the Model S and Model X as well as 500,000 units of the Model 3 and Model Y annually. And for the time being, the company has also increased the capacity of its Shanghai factory, meaning that it can churn out 250,000 Model 3 cars per year. If you add this all up, the total comes to 840,000 deliveries per year.
But that’s not all. There are still numerous other gigafactories, which can considerably boost up Tesla’s car production ability as the quarters roll on. The automaker is bringing in a new Model Y manufacturing line at its factory in Shanghai. Besides, many other factories are being built in Texas, Austin, and Berlin, Germany. Once the upcoming plants are completed, they will ramp up capacity fast enough for Tesla to hit the magical 1 million deliveries by the end of 2021.
Risky Expenditure Plan, but It Will Pay Off
The automaker is steered towards higher capital expenditures for the current financial year to somewhere between 2.5 to $3.5 billion. Tesla also anticipates that its capital expenditures will hit over $4.5 billion over the next two fiscal years. What does this mean given that the market hasn’t responded too well to the expenditure plans?
Well, one of the reasons why the market has responded adversely to this spending plan is because it may imply extra trips towards the secondary markets. Moreover, it might also mean more dilution for current stakeholders. Back in September 2019, TSLA disclosed an equity offering worth 5 billion dollars in an SEC filling. The company also said that it plans to put extra shares up for sale occasionally and at-the-market costs. That’s despite Tesla registering a record-breaking free cash flow worth 1.4billion dollars.
A 5 billion dollar offering at the company’s current $402 billion market cap would mean a dilution of approximately 1%, which is considerably lower than Tesla’s stock standard movement for a day. But then again, no one can tell how often or how large forthcoming offerings will be. Furthermore, there’s the possibility that Tesla might collapse if it begins to miss future distribution prospects.