Tesla reports its longest-ever profitable streak, topping Wall Street’s expectations for the second quarter (TSLA)

Tesla turned a profit in the second quarter, it said Wednesday, topping Wall Street’s expectations for the three-month period marked by coronavirus shutdowns, cementing its longest streak of profitability in company history. 

Here are the important figures:

  • Earnings per share (adjusted): $2.18 versus an expected $-0.15
  • Revenue: $6.04  billion versus an expected $5.2 billion

“We believe the progress we made in the first half of this year has positioned us for a successful second half of 2020,” the company said in a press release. “Production output of our existing facilities continues to improve to meet demand, and we are adding more capacity. Later this year, we will be building three factories on three continents simultaneously.”

Shares of Tesla, already at record highs, rose as much as 7% in late trading Wednesday following the release. 

The company also disclosed $428 million worth of revenue from regulatory credits that it sells to other automakers who make far fewer electric vehicles, its highest ever for the growing segment. The company said this, along with an uptick in solar energy sales, helped to insulate against falling vehicle prices.

Lower overhead costs thanks to a “temporary reduction” in employee compensation also helped to fuel the quarter’s success, Tesla said. That’s despite an increase in capital expenditures as the company builds its third car factory near Berlin in Germany. 

On a conference call scheduled for later Wednesday, analysts will likely look for insight about demand trends the company is seeing at home in North America as well as in the increasingly important Chinese market. They’re also sure to ask for updates on the new European factory, and for any decisions on its second US factory, which is seemingly headed for Austin, Texas.

Before the pandemic hobbled the entire auto industry, Tesla had announced plans to build up to 500,000 vehicles in 2020, something says it will still be able to do despite the ongoing difficulties. Many of Tesla’s competitors have in recent months lowered their expectations because of the negative economic environment.

For investors that have piled into the stock in recent months, helping it reach record highs and sealing Tesla’s status as the world’s most valuable automaker, the beat is likely to be taken as pure vindication. Following delivery numbers that surpassed expectation in June, the stock has hit record highs on a near weekly basis, fueled in part by speculation it could be added to the benchmark S&P 500 index after a full year of profitability. 

Such a streak has also left Wall Street analysts scratching their heads to find a motive for the meteoric rise. Despite outperform rankings, their average price target still trails current trading.

“It’s hard to see how competitors can catch up,” said Piper Sandler’s Alexander Potter put things succinctly earlier this month, as he slapped the highest ever price target, $2,322 on the stock. “Tesla’s own capacity is the biggest constraint to share gains.”

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