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James Li
James Li
Articles (1346)  | Author's Website |

Elon Musk's Tesla Rises on 4th Consecutive GAAP Profit

Electric vehicle maker reports second-quarter profit despite decreased operations

July 22, 2020 | About:

Shares of Tesla Inc. (NASDAQ:TSLA) soared over 6% in aftermarket trading on Wednesday after reporting its fourth straight quarter of profits based on generally-accepted accounting principles (GAAP).

For the quarter ending June 30, the Palo Alto, California-based electric vehicle giant reported GAAP net income of $104 million, or 50 cents in earnings per share, compared with a net loss of $408 million, or $2.31 in loss per share during the prior-year quarter.

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Company posts fourth-consecutive quarter of GAAP profit despite decreased operations

Tesla reported $327 million in GAAP operating income for the June quarter, yielding an operating margin of approximately 5.4%. The company reported positive net income for the fourth consecutive quarter even though production and deliveries declined due to coronavirus-related shutdowns.

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Total vehicle production declined 20% from the prior quarter on the back of Tesla’s main factory in Fremont closing due to the coronavirus outbreak. Despite this, operating income received boosts from increased regulatory credit revenues and lower operating expenses due to a reduction in employee pay.

Stock rises in aftermarket trading

Shares of Tesla traded around $1,688 in aftermarket trading, up 6.01% from the closing price of $1,592.33.

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GuruFocus ranks Tesla’s financial strength 5 out of 10. Although the company has a strong Altman Z-score of 6.77 and a good Piotroski F-score of 6, Tesla’s interest coverage and debt ratios are underperforming over 84% of global competitors. The GuruFocus website also warns that Tesla’s long-term debt has increased by $3.3 billion over the past three years.

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Tesla’s profitability ranks 3 out of 10 on the heels of returns on equity underperforming over 76% of global auto manufacturers.

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Fifteen GuruFocus users placed Tesla into the “Not Interested” basket using a new website feature where users can vote whether they are buying the stock, considering buying the stock, researching the stock, or dismissing the stock as a potential investment. The baskets are based on Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio)’s theories of achieving higher returns by investing only within your “circle of competence.” In comparison, two users placed the stock in the "Researching" basket, three placed it in the "Buying" basket and no users have so far put it in their "Considering" basket.

Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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