Profit Streak Continues for Tesla

Profit Streak Continues for Tesla

There’s more good news on the financial front for Tesla as the automaker reported big profits for the first half of the year, despite some huge obstacles, and expects a positive outlook for rest of the year, too.

In the company’s earnings report for the second quarter, Tesla reported a profit of more than $6 billion and total earnings of $104 million for the three-month period.

It marked the fourth consecutive quarter of profit for Tesla, and this makes the Silicon Valley company eligible for inclusion on the S&P 500, which would make stock more widely available to more investors.

Initial Reaction to Tesla Earnings

In reaction to the news as well as an announcement by CEO Elon Musk regarding plans for a huge new production facility near Austin, Texas, Tesla stock prices rose by 5% in just a few hours late Wednesday.

“Our business has shown strong resilience during these unprecedented times,” the company said in a statement. “Despite the closure of our main factory in Fremont for nearly half the quarter, we posted our fourth sequential GAAP profit in Q2 2020, while generating positive free cash flow of $418 million.”

The $104 million in earnings reflects 50 cents a share, which is a sharp contrast from a year earlier, when the company reported a loss of $408 million, or $2.31 a share. A year ago, Tesla shares were trading at around $260, and now they are above $1,500.

The improved financial situation for Tesla comes about as the company is trying to move away being perceived as a car maker for a limited luxury market. Instead, its goal is to provide more affordable electric vehicles for the mass consumer and to reduce emissions around the world.

In a conference call with analysts Wednesday, Musk acknowledged that 2020 has brought a series of challenges, but he did not specifically mention the pandemic. He did say there were parts shortages and production issues related to supply-chain problems. He pointed out that demand for Tesla vehicles was never an issue.

In fact, the company is ramping up production on three different fronts. It is building factories for its Model Y compact SUV in Berlin and Shanghai and expects to start sales in those locations next year. Musk announced Wednesday that the new Texas facility will be the company’s largest operation and will be for production of the Model 3 and Model Y as well as the Tesla Semi and Cybertruck.

“We believe the progress we made in the first half of this year has positioned us for a successful second half of 2020,” the company’s statement continues. “While we invest in our product roadmap, improve technology and localize production, we continue to drive cost efficiencies across the business and closely manage working capital. It is important to manage our cash diligently in order to ensure we are ready for any scenario.”

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