Tesla Rises on 5th Consecutive Quarter of Profits

- By James Li

Shares of Tesla Inc. (NASDAQ:TSLA) soared over 3% in aftermarket trading on Wednesday on the back of the electric vehicle giant reporting its fifth consecutive quarter of net profit.

For the third quarter, the Palo Alto, California-based company reported net income of $331 million, or 27 cents in earnings per share, compared with net income of $143 million, or 16 cents in earnings per share, in the prior-year quarter. Adjusted net earnings of 76 cents per share outperformed the Refinitiv consensus estimate of 57 cents per share.


Tesla Rises on 5th Consecutive Quarter of Profits
Tesla Rises on 5th Consecutive Quarter of Profits

Company achieves new quarterly record operating income level despite high costs

Tesla said that operating income reached a new quarter record of $809 million despite operating expenses increasing over 30% year over year due to construction of new factories in Berlin and Texas. Revenue increased 39% year over year, driven by a record 139,300 vehicle deliveries during the quarter.

Tesla Rises on 5th Consecutive Quarter of Profits
Tesla Rises on 5th Consecutive Quarter of Profits

Tesla CEO Elon Musk said during the company's "Battery Day" meeting that the company plans to manufacture battery cells in house as part of its rapid expansion plan. The company increased Model 3 and Model Y vehicle production capacity at the Fremont plant to 500,000 vehicles per year and Model 3 production capacity at Gigafactory Shanghai to 250,000 per year.

Stock rises on upbeat outlook yet remains significantly overvalued

Shares of Tesla traded over $437 in the aftermarket hours, up over 3% from Wednesday's close of $422.64. Musk said that while the coronavirus pandemic presents challenges, the company still targets deliveries of 500,000 for the year.

Despite the upbeat outlook, Tesla remains significantly overvalued based on its price-to-GF Value ratio of 3.79. The company's price-earnings, price-book and price-sales ratios underperform over 96% of global competitors, justifying its significant overvaluation.

Tesla Rises on 5th Consecutive Quarter of Profits
Tesla Rises on 5th Consecutive Quarter of Profits

Gurus that are not afraid of Tesla's high valuation include Ron Baron (Trades, Portfolio)'s Baron Funds, PRIMECAP Management (Trades, Portfolio), Spiros Segalas (Trades, Portfolio) and Jim Simons (Trades, Portfolio)' Renaissance Technologies.

Tesla Rises on 5th Consecutive Quarter of Profits
Tesla Rises on 5th Consecutive Quarter of Profits

Disclosure: No positions.

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This article first appeared on GuruFocus.