Tesla Inc. ended 2019 with a near-record valuation thanks to a nearly 70% rally in the stock price since late October. But investors should be careful not to confuse a buoyant stock price with a sustainably profitable business.
Fourth-quarter vehicle deliveries, expected later this week, might keep the momentum going. Analyst consensus calls for Tesla to deliver 106,000 cars in the quarter, according to FactSet. That would be a record for the electric auto maker and amount to roughly 17% unit growth from a year earlier. Wall Street analysts expect nearly $50 billion in annual revenue by 2022, which would be more than double 2019’s projected total.
Still, evidence abounds that Wall Street should curb its enthusiasm. Hitting that figure would mean Tesla barely met the low end of their 2019 guidance, which originally called for 360,000 to 400,000 deliveries. At the end of 2018, Tesla said it was selling vehicles at an annualized rate of 350,000. While record deliveries helped Tesla eke out a small third-quarter profit, total revenue fell by 8%. The car company has booked a cumulative net loss of more than $3 billion since sales of the Model 3 sedan began in 2017. Delivery figures should be flattered by the fact that Tesla began selling its Model 3 sedan in overseas markets in 2019.
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Tesla hasn’t traditionally broken out vehicle deliveries by country for investors, but U.S. automotive revenue fell by 40% from a year ago in the third quarter. The loss of federal tax credits for new Tesla buyers won’t help. Evidently fleeting interest from U.S. buyers should raise questions about how long current strength in markets like China or the Netherlands can persist. So should the introduction of more electric competitors.
With the stock now trading above 70 times 2020 adjusted earnings estimates and worth twice as much as Ford Motor Co. , Tesla shareholders appear comfortable. That might prove an expensive bet to make.
Write to Charley Grant at charles.grant@wsj.com
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