After trading on October 21, Eastern time, Tesla released its performance report for the third quarter of fiscal year 2020. Before the earnings report was released, analysts were mostly optimistic about Tesla's expectations. As of the publication of the American Stock Research Agency, Tesla reported $442.18 per share, with a total market value of approximately $393.8 billion.
Judging from the various data in this quarter, Tesla will undoubtedly give the bulls a dose of "chicken blood". Vehicle deliveries have increased significantly on the basis of the second quarter, and at the same time, revenue has set a record high since its listing, boosting investors and the market's confidence in reaching 500,000 vehicle sales at the end of the year.
After achieving profitability for five consecutive quarters, many institutions also raised Tesla's stock price rating, which became the direct reason for the nearly 5% increase in stock price in after-hours trading. Following this trend, Tesla exceeded $400 billion in market value It also seems to be a certainty.
Specifically, from the perspective of stock price growth, Tesla is undoubtedly a growth potential stock, but how far is it from becoming a value stock with long-term investment?
The number of delivered vehicles hits a new high, the price reduction strategy may become a "double-edged sword"
The third-quarter financial report data shows: revenue data was 8.771 billion US dollars, compared with 6.303 billion US dollars in the same period last year, a year-on-year increase of 39.16%; compared with 6.036 billion US dollars in the previous quarter, an increase of 45.31%.
Tesla’s revenue this quarter has achieved a significant increase from the previous quarter. As can be seen from the figure below, Tesla’s revenue data this quarter surpassed the revenue record of $7.384 billion set in the fourth quarter of 2019. What’s interesting is that Tesla's stock price also began to show a rapid upward trend in the fourth quarter of 2019.
The American Stock Research Agency found through analysis that the key to achieving a greater increase in revenue this quarter is the increase in the number of vehicle deliveries in the third quarter. In early October, Tesla announced that the number of cars delivered in the third quarter was 139,500, a year-on-year increase of 43.67% and a month-on-month increase of 53.63%. Among them: Model S and X deliveries are 15,200 vehicles; Model 3 and Y deliveries are 124,100 vehicles.
At the beginning of this year, Musk set a full-year vehicle sales volume of 500,000 for Tesla. At present, the delivery volume in the first and second quarters is about 180,000, and the delivery volume has increased by 139,500 from the third quarter. In terms of speed, it does not seem difficult to complete the sales target of about 180,000 vehicles in the fourth quarter.
However, it cannot be ignored that the fourth quarter may usher in a second outbreak of the epidemic. If this is the case, the suspension of production and production in the first and second quarters of this year will be repeated. Under the premise of reduced production capacity and efficiency, can the expected delivery volume be completed? , It is unknown.
Also not to be overlooked is the strategy adopted by Tesla to reach 139,500 vehicle delivery data in the third quarter. On the first day of the National Day of the Eleventh, Tesla officially announced that the price of the domestic Model 3 standard battery life upgraded version was subsidized from 271,55 yuan to 249,900 yuan.
According to historical data, this is not the first time Tesla has cut prices. From October 2019 to October 2020, in just one year, Model 3 has been reduced in price five times, and the actual price has been reduced from 355,000 yuan to 249,900 yuan, depreciating by one-third in one year.
Regarding Tesla’s price reduction strategy, Musk explained in this quarter’s earnings conference: “It is necessary to reduce the price to a level that people can afford, so that consumers can afford Tesla’s cars. This is special. Sla's ultimate goal."
The price reduction strategy did stimulate sales. But the US Stock Research Agency believes that in the long run, the price reduction strategy may do more harm than good. First, if Tesla blindly adopts a price reduction strategy to stimulate sales, it will also stimulate new local car manufacturers such as Xiaopeng and Weilai to lower prices in the largest market in China. The final outcome is that the overall industry competition will intensify and worsen industry competition. Ecology.
Second, part of Tesla’s current value comes from the "brand premium". Blindly adopting a price reduction strategy will also adversely affect Tesla’s brand tonality. Moreover, once consumers become accustomed to lower prices, subsequent increases will be made. Prices will become quite difficult.
Net profit and gross profit achieved double growth, global expansion pushed up operating expenses
The financial report data for this quarter showed that the net profit attributable to ordinary shareholders in the third quarter was US$331 million, a year-on-year increase of 131.47%; the net profit performance of the previous quarter was US$104 million, a month-on-month increase of 218.27%. This is the fifth quarter that Tesla has achieved profitability.
Compared with the previous quarter, the factory's resumption of work in this quarter has been greatly improved. Tesla's global factories have resumed work and production. The increase in production capacity and the low-cost sales strategy have made the net profit performance in the third quarter achieved a large margin. growth of.
While net profit in the quarter has more than doubled, Tesla's gross profit margin has also increased this quarter. According to the financial report data, the gross profit margin and overall gross profit margin of Tesla's vehicle sales in the third quarter were 27% and 23.5%, respectively, and both achieved an increase year-on-year.
Chief Financial Officer Zach Kirkhorn said at the earnings conference: "Looking back at the company’s development history over the past year and a half, not only has it increased sales, but also increased profitability, despite a series of price cuts. During this period, operating costs have been maintained at a relatively stable level."
On the basis of price cuts, the key to Tesla's higher gross profit margin lies in the Chinese market. The financial report shows that in the third quarter, Tesla had a production capacity of 250,000 Model 3 vehicles in the Shanghai plant, second only to the 500,000 vehicles in Fremont, a local US plant. The Shanghai factory has been officially put into operation for less than a year, which shows that Tesla is optimistic about the future of the Chinese market.
China has been the world's number one automobile producer and marketer for 11 consecutive years, and has also become the world's largest country in terms of production and sales in the field of new energy for four consecutive years. Tesla's Shanghai plant, leveraging on the growing scale advantages of China's auto industry, the continuous reduction of transportation costs and parts and components, makes it possible for Tesla to implement price reduction strategies to seek more profits.
Accompanying the increase in gross profit margin is the increase in operating expenses. Tesla's research and development expenses in the quarter were US$370 million, a year-on-year increase of 12.1%; sales and management expenses were US$890 million, a year-on-year increase of 48.3%.
One possible explanation for the increase in operating expenses this quarter is the accelerated pace of global factory expansion. In addition to the super battery factories in China and the United States that have already been built, Tesla also plans to build four new factories around the world-the Berlin Super Factory, the United States Central Super Factory, Asian Super Factory and British Super Factory.
In addition, when Musk interacted with netizens on Twitter, he said that Tesla’s autopilot system will be released to the public at the end of 2020, and the realization of its autopilot depends on the new Full Self-Driving (Full Self-Driving, FSD) software, the US Stock Research Agency speculated that the research and development of FSD software pushed up the research and development costs this quarter.
In order to deal with the uncertainty of the economic environment, Tesla is also struggling to reduce costs. On October 17, Tesla's official website in China revealed that it would cancel the 7-day unreasonable return policy. According to industry insiders, this is a strategy Tesla has adopted to further reduce costs.
Tesla announced that it will launch a new model with a price of only $25,000 in the future, with the intention of seizing the low-end sinking market. But how to make enough profits on a car that sells for only $25,000 is a problem that Tesla will face.
From "potential stocks" to "value stocks", how long is Tesla's road?
Since the beginning of this year, Tesla's stock price has risen to record highs. As of the publication of the American Stock Research Agency, Tesla's increase this year was 404.90%, while the Nasdaq Composite Index rose 28.00% over the same period. At a market value of nearly 400 billion US dollars, Tesla's gains can be said to lead the US technology stocks.
In the recent analyst rating, Standard & Poor's stated that due to Tesla's increasing competitiveness, it will adjust its rating from B+/stable to BB-/stable. Widebush Securities analyst Daniel Ives reiterated his neutral rating on Tesla, but raised its target price from $475 to $500.
After achieving four consecutive quarters of profit last quarter, there was a discussion about whether Tesla could be included in the S&P 500 index. Judging from the five consecutive quarters of profitability in this quarter, Tesla has great hopes of being included in the S&P 500 index. On the one hand, because of its good performance; on the other hand, because Tesla is not included in the Standard & Poor's 500 index has had an adverse effect on the overall performance of the index.
At the same time, there are countless doubters and short sellers in the market. This quarter's performance indicators may have poured cold water on short sellers. Judging from the current stock price performance, Tesla is undoubtedly a "potential stock", but how can this potential stock develop into a "long-term value stock"? The US Stock Research Agency believes that this will depend on the following two points:
One is whether the "premium" brought by founder Musk to Tesla will last. In the market, the characteristics of a CEO can to a large extent bring "emotional value" to his company, that is, because of the appreciation of the CEO and transfer to a certain company, a typical example is Steve Jobs to Apple.
The market's evaluation of Musk is very polarized, and Musk's personal characteristics are directly reflected in Tesla's development strategy. Keely Sulprizio (Kely Sulprizio) was Tesla's last global communications director. After leaving at the end of 2019, Tesla did not seek a successor for this position. In October of this year, Tesla announced the dissolution of its public relations team.
In the future, whether Musk's words and deeds can attract new followers, or change the attitude of some bearish people, may also be an important dimension that affects Tesla's future stock price trend and market valuation.
The second is the performance of the Chinese market in the future. The bulls believe that Tesla is the Apple of the automotive field, leading the revolution in the automotive field. A considerable part of Apple's success is due to its timing of entering China, the largest market, and its successful seizure of the Chinese market.
The original intention of Tesla being introduced into China was to drive the development of the domestic new energy automobile industry, and Tesla is undoubtedly very important to the Chinese market. However, with the emergence of new domestic car manufacturers such as Xiaopeng and Weilai, the future seizure of Tesla's Chinese market will become more intense.
Starting from the end of 2023, the Shanghai government will end the 4-year tax exemption policy for Tesla, after which Tesla is expected to pay 2.23 billion yuan in taxes every year. Judging from the performance of this quarter's net profit, it seems that there is still considerable difficulty in reaching this number.
Source of this article: US Stock Research Agency