Morningstar

Tesla Closes 2020 With a Strong Quarter

Tesla reported fourth-quarter results that missed the Refinitiv consensus adjusted diluted EPS of $1.03. EPS instead grew 95.1% year over year and by 5.3% sequentially to $0.80.

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Tesla Inc
(TSLA)

Tesla TSLA reported fourth-quarter results that missed the Refinitiv consensus adjusted diluted EPS of $1.03. EPS instead grew 95.1% year over year and by 5.3% sequentially to $0.80. We calculate a pretax loss of $22 million excluding $401 million of regulatory credit revenue, but free cash flow including the credits rose 34% from third-quarter levels and 84% year over year to $1.87 billion. The stock fell about 5% in Jan. 27 after hours trading but we are not concerned as we’ve long believed what matters is what will Tesla look like in 2030 and beyond rather than any single quarter’s results. Tesla is still a young company despite its large market capitalization so the exact cadence of growth can be hard to estimate. We are not changing our fair value estimate but we will reassess all valuation inputs in a few weeks after the 10-K is filed. If we change our fair value estimate, we expect any change to be upward due to rolling the model a year leading to more vehicles delivered over our 10-year forecast period.

We expect more volatility on quarterly results versus consensus going forward due to management intentionally shifting to vague outlook language in order to focus on long-term goals. We like management prioritizing the long term, but no commentary on 2021 capital expenditure and simply saying 2021 deliveries are expected to “materially exceed” Tesla’s long-term annual growth expectation of 50%, means there could be a wide range of sell-side submissions for consensus. This variability could yield a consensus figure that is not helpful for gauging expectations and then more stock price volatility may occur after results come out.

We expect a great 2021 from Tesla, though management said deliveries will be skewed to the second half of the year due to the new generation Model S and Model X retooling (delivery starts in February). Current installed annual capacity of 1.05 million vehicles says to us that 2021 deliveries will be at least 850,000.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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