The deleted hurdle still leaves Tesla Stock in ridiculous mode

A record quarter for

Tesla

TSLA 1.57%

is not as fast as it seems.

Tesla announced on Saturday morning that it had delivered 180,570 cars worldwide in the fourth quarter, setting a new company record. That brings the 2020 total of almost 500,000in line with the company’s most recent guidelines. The company also said it will soon begin shipping its China-made Model Y crossover vehicle to customers.

Meeting the leadership is certainly good news, but it is hardly a huge operational feat that should dazzle Wall Street. For starters, making operational forecasts is a routine occurrence for most members of the S&P 500, to which Tesla was added last month.

And investors shouldn’t forget about this chief executive

Elon Musk

once in 2016 claimed that Tesla would sell a million cars by 2020. Since he made that claim, Tesla stock has rebounded nearly five-fold. Last year came and went even without Mr Musk’s promise to have one million fully autonomous “robot axes” on the streets by the end of 2020.

Back to the present, the company said it produced almost as many cars as it delivered to customers in the fourth quarter. However, in October, Tesla said it had enough manufacturing capacity installed to produce 210,000 in the quarter, suggesting that capacity utilization was actually 86% for the quarter.

As a result of last year’s violent rally, Tesla’s market value is nearly $ 670 billion. That’s $ 1.3 million per car sold last year, and seven times the combined market value of

ford

and

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General Motors.

Still, Tesla has a tiny share of the global auto market and competition for electric cars begins to warm up. To justify the price of the stock, Tesla should exceed, not just meet, its own forecasts.

In addition, the small profit Tesla makes from selling regulatory loans to help competitors meet issuing mandates is highly flattered. While the fourth quarter balance sheet won’t be released until Tesla releases full financial results, Tesla has posted revenue of $ 1.3 billion for the previous four quarters, with a profit margin of 100%. That source of income could dwindle as more electric competition from legacy automakers comes online, which could mean fewer buyers for the loans.

These concerns don’t bother shareholders, who are sitting on huge profits. However, recent history offers a warning: Tesla’s market value has been halved twice in two episodes since 2018. In that case, stocks would still be valued at 700 times trailing earnings. The leading companies in the auto industry have historically been lucky enough to have a 10x earnings rating.

Mr Musk made a wise decision last year to sell $ 10 billion worth of fresh company stock amid the angry rally. For the average investor, it is probably a good idea to follow his example.

Write to Charley Grant at [email protected]

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