Tesla Inc (NASDAQ:TSLA) shares were higher pre-market on Thursday after the electric vehicles maker posted a second-quarter profit after the close on Wednesday with cost cuts and strong deliveries helping offset coronavirus-related factory shutdowns.
The Nasdaq-listed firm posted net income of $104mln from April to June, 2020, or $0.50 per share, marking the first time the company has posted a profit for four straight quarters.
Tesla affirmed its goal to deliver at least half a million vehicles by the end of 2020 despite production interruptions, including the shutting of its California factory for nearly six weeks of the quarter on orders from local authorities. The company delivered more than 90,000 vehicles in the second quarter, beating analyst expectations.
Tesla’s second-quarter revenue fell to $6.04 billion from $6.35 billion a year earlier, but that also surpassed analyst expectations for revenue of $5.37 billion.
In a conference call following the result, Tesla boss Elon Musk also announced that Travis County, Texas, which includes Austin, would be the site of Tesla’s new factory. The area had been competing with Tulsa, Oklahoma, for the new plant, which promises to create at least 5,000 jobs.
Musk said the factory would produce Model 3 and Model Y vehicles for the Eastern United States, as well as a new semi-truck called the Tesla Semi and the carmaker’s futuristic Cybertruck.
Valuation remains a sore point
Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “We already knew Tesla’s manufacturing operations had navigated the first stages of the crisis well, with production and deliveries well ahead of analyst expectations. The questions were all about whether Tesla had also managed to protect its margins. In the event margins have been not only been protected but improved.
“The group has benefitted from the tailwind of increasing sales in China, which look to be relatively higher margin thanks to the lower manufacturing costs, and increased recognition of software revenues, but even so these numbers are impressive.”
He added: “Having delivered a fourth consecutive quarter in the black for the first time Tesla is eligible to join the S&P indices – which would open up a whole new audience of potential investors. Given that, and having beaten analyst expectations this quarter, a 4.3% share price move might seem rather muted – Tesla investors are used to spectacular reactions to the company’s announcements.
“However, the electric car giant has enjoyed a spectacular run already this year, rising 270%, and while questions about the group’s long term future may be a thing of the increasingly distant past its valuation remains a sore point for many.”
Tesla shares, which have gained more than 500% over the past year, were up 5% 60 $1,677 in pre-market US trade on Thursday. Analysts believe the rally has been fuelled in part by expectations of Tesla’s imminent inclusion in the S&P 500 stock index.