Tesla Inc., for the first time in its 17-year history, reported a fourth-consecutive profitable quarter, a milestone that is sure to bolster Chief Executive Elon Musk’s pitch that he can usher in the age of fully electric cars. Defying the global coronavirus pandemic, threat of extended economic recession and Wall Street analysts who expected a loss, the Silicon Valley auto maker found a way, helped by the sale of regulatory tax credits, to eke out a $104 million profit in the second quarter.

On an adjusted basis, excluding stock-based compensation, the company said Wednesday it made $2.18 a share. Analysts surveyed by FactSet, on average, expected an adjusted loss of 2 cents a share earlier in the day, an estimate that narrowed from a loss of 14 cents on Monday and a much larger projected loss in May.

CFO Zachary Kirkhorn said that Tesla expects its regulatory credit revenue to double in 2020 relative to 2019, and to continue for some unspecified amount of time. But to achieve long-term profitability, the company is aiming to reduce the cost of vehicle production, and make more money from software over time, namely its Full Self-Driving option.

Tesla’s Full Self Driving option, an advanced driver assistance package sold for $8,000 in the U.S., enabled the company to recognize deferred revenues of $48 million this period. Tesla defers revenue from sales of its Full Self Driving system, then recognizes it over time as the company rolls out updates to the functionality. At this time last year, Tesla’s shares were trading around $260. Now, they’re trading above $1,500, making the company the most valuable auto-maker in the U.S. by market cap.

During the period ending June 30, 2020, Tesla grappled with the effects of the Covid-19 pandemic and widespread civil rights protests on its employees, customers and U.S. factory operations, especially. The company also achieved better-than-expected second-quarter vehicle production and delivery numbers, sending Tesla’s stock price soaring. In July, Tesla shares have risen more than 50% so far, adding to the stock’s more than threefold increase for the year to date.

Tesla has promised its fans and shareholders an all-electric Tesla Semi, a million-mile battery, a futuristic Cybertruck, and to have 1 million robotaxi-ready vehicles on the road by the end of 2020. However, Tesla slashed its research & development spending in the second quarter to $279 million down from $324 million a year ago.

Todd Horwitz Chief Strategist BubbaTrading.com
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