Stock markets and investors are generally quick to forget the past difficulties of companies. The travails of Tesla Inc (NASDAQ: TSLA) are a case in point.
Previously, CEO Elon Musk – by his own admission – had considered trying to sell the electric vehicle (EV) maker to tech giant Apple Inc (NASDAQ: AAPL) deep into the “production hell” of Tesla’s Model 3 programme back in 2018.
At that point, Tesla’s share price had been trading sideways for the previous three years or so. The rest, as they say, is history.
Tesla shares have risen 10-fold since the middle of 2018 amid a remarkable fact; that of the company actually exceeding all expectations.
While growth stocks like Tesla usually promise outsized revenues (and, thus, profits) far into the future, the EV maker has started to deliver consistently on the bottom line.
That has meant profits from both a net income and operating profit perspective. In the latest quarterly numbers, which is released this week, Tesla saw its revenue hit US$12 billion in the second quarter – up 98% year-on-year.
Meanwhile operating profit of US$1.3 billion was a new record high and GAAP net income – at US$1.1 billion – exceeded the billion-dollar mark for the first time.
Tesla’s GAAP gross margin also saw a substantial improvement, hitting 24.1% for the quarter – up 330 basis points from the 21% in the same quarter in 2020.
One of the keys to these numbers has been production coming online in its various Gigafactories and deliveries hitting their stride.
In the second quarter, Tesla delivered just over 200,000 vehicles, a ramp-up in production over the past year which seems to be sustainable and growing (see below).
For long-term investors, who see EVs continuing to gain market share at the expense of fossil fuel-powered automobiles, Tesla’s increasing reliability on the production side bodes well for the future.
Source: Tesla Q2 2021 earnings presentation
Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be.
In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.