Tesla rises as company ekes out a Q1 profit

Tesla shares rose more than 7% after hours as the company showed its third consecutive quarter with a profit.

Here’s how the company did: 

• Earnings per share (EPS): $1.24 per share, ex-items
• Revenue: $5.99 billion

Wall Street was expecting an adjusted loss of 36 cents per share and revenue of $5.9 billion for Q1, according to a survey of analysts by Refinitiv. However, estimates varied widely, and comparing Tesla’s actual results with estimates isn’t straightforward, given the difficulty of predicting the impact of the novel coronavirus. 

The company reported a GAAP profit during the first quarter of $16 million.

However, Tesla also recorded negative free cash flow of $895 million, which will complicate its previously stated goal of being free cash-flow positive for 2020.

Tesla walked back previous guidance in Wednesday’s investor update, saying while it has “capacity installed” to hit 500,000 vehicle deliveries in 2020, it remains uncertain how quickly its U.S. car plant, and suppliers, can ramp up production following Covid-19 restrictions. It also said near-term profit guidance is “currently on hold,” throwing cold water on hopes that it may achieve 4 quarters of profitability in a row, and be eligible to join the S&P 500. 

Previously, Tesla said that it had delivered around 88,400 vehicles in the first quarter of 2020, including: combined deliveries of 76,200 Model 3 sedans and Model Y cross-over SUVs, and combined deliveries of 12,200 of the older and more expensive Model S and X vehicles.

Automotive revenue hit $5.1 billion, and nearly 7% of that came from regulatory credits, according to Tesla’s Q1 report. The credits helped the company fatten its automotive gross margins, which it says are now up to 25.5%.

This period marked Tesla’s first full quarter with a factory open in Shanghai, and Tesla’s first quarter of Model Y deliveries and production. 

Last quarter, revenue came in at $7.38 billion — Q4 revenues are typically the highest of the year because of seasonal factors — and Q1 2019 revenues were $4.54 billion.

Government health orders, meant to curb the spread of the virus, forced Tesla to suspend production at its new car plant in Shanghai for around two weeks in February. By the end of March, Tesla would face an even longer restriction in the U.S.

Nonetheless, CEO Elon Musk was able to raise $2 billion in a stock offering in February before the epidemic in China expanded into a global pandemic.

Tesla’s main U.S. car plant in Fremont, California, has been operating at a minimum basic level since March 24, as required by Alameda County public health orders. (Minimum basic operations primarily include physical security around the facility, and maintenance of equipment and inventory there.)

The company also suspended production temporarily at its battery plant outside of Reno, Nevada, and at its facility in Buffalo, New York, where it makes components for its batteries and its electric vehicle charging stations, along with some solar products.

Impacts of these shut-downs are expected to hit Tesla’s balance sheet fully in the second quarter of 2020. The company has already implemented furloughs, pay cuts and ceased all but essential contractor and temp assignments.

Despite Covid-19 related business disruptions, Tesla was able to sell cars online and deliver them to customers with a “contactless” delivery option throughout the U.S., and to keep servicing its customers’ cars.

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