Tesla Reports Mixed First-Quarter Earnings After Stock Soared 700% in 2020

After Tesla's stock soared 700 percent, the company is under tremendous pressure to justify its astronomical valuation.

A visitor experiences Tesla Model X during the 3rd China International Import Expo (CIIE) at the National Exhibition and Convention Center on November 5, 2020 in Shanghai, China. Guo Zhihua/VCG via Getty Images

Prepare for Tesla’s (already sky-high) stock price to move as much as 7.2 percent, based on options pricing, in either direction after the electric carmaker reports first-quarter earnings Monday afternoon.

In 2020, Tesla shares soared more than 700 percent thanks to the company’s proven ability to turn a profit after a decade of losses, new projects such as in-house battery development and a new factory in Austin, Texas, and CEO Elon Musk’s growing personal appeal among young, highly risk tolerant retail stock investors. But its wild rally has slowed down in 2021, with share price up less than 1 percent year-to-date. Investors have extremely high expectations for Tesla’s first-quarter financial results before deciding which direction they want to send the stock.

After market close Monday, Tesla posted $10.39 billion in revenue for the first quarter and $438 million in net earnings, slightly missing analyst expectations. Wall Street was anticipating $10.5 billion in revenue and $509 million in net earnings. Stock fell 2.6 percent in the after hours after the numbers came out.

Tesla revealed earlier this month that it had delivered 184,800 cars in the first quarter, a new record, and produced more than 180,000 vehicles in the three-month period.

Tesla’s delivery numbers have been growing every single quarter since selling its first car in 2008. The pace of growth accelerated in 2018 after the mass-market Model 3 sedans reached volume production and began rollout. Last year, another affordable vehicle, Model Y, hit the market. In the first quarter, Tesla delivered 180,338 Model 3 and Model Y globally, more than doubling the number in the same period last year (before the COVID-19 impact kicked in).

However, one worrying sign for profitability is the fact that Tesla is selling fewer of its expensive Model S and Model X vehicles. In the first quarter, Tesla delivered only 2020 vehicles across these two models (out of 184,800 total deliveries) and didn’t produce any new ones.

Running out of federal subsidies and competition from established automakers are also alarming signs for Wall Street.

“Tesla sees itself as the apex player during the most formative phase of the industrialization of sustainable propulsion and transition off of fossil fuels,” Morgan Stanley’s star analyst Adam Jonas wrote in a note last week, adding that the immediate priority is to expand capacity and begin “industrializing the ‘Tesla hegemony’ before the market gets even more crowded.”

“We acknowledge Tesla has shaken up the auto industry, but recent commitments and advancements from incumbent automakers such as Volkswagen and General Motors suggest to us that Tesla has achieved peak market share within the EV category,” Cowen analyst Jeffrey Osborne wrote in a note earlier this month. Tesla Reports Mixed First-Quarter Earnings After Stock Soared 700% in 2020