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January 27, 2021 6:30 PM, EST

Tesla Disappoints Wall Street With First Results as a Blue Chip

Tesla cars for sale in Barcelona. (Angel Garcia/Bloomberg News)Tesla on sale at a store in Barcelona. (Angel Garcia/Bloomberg News)

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Tesla Inc. reported lower-than-expected profit and record revenue, mixed results that disappointed investors used to razzle-dazzle — but more in tune with the S&P 500 heavyweight it has become.

The electric-vehicle market leader reported a fourth-quarter profit of 80 cents a share Jan. 27 on an adjusted basis due largely to price cuts, falling short of analysts’ consensus estimate for $1.03 and well below the blowout $2.14 of a year ago — before the global pandemic set in. The results marked a sixth straight profitable quarter but also the first time the company missed Wall Street’s forecast since July 2019.

Tesla shares fell as much as 7.6% in postmarket trading after closing down 2.1% to $864.16.

The Palo Alto, Calif.-based company, which joined the ranks of the prestigious S&P 500 Index last month, said operating margins shrank to 5.4% in the latest quarter, down from 9.2% in the previous three months. It blamed aggressive price-cutting in China, supply-chain costs and a big pay package for Chief Executive Officer Elon Musk and other executives.

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“It was a mixed bag,” Gene Munster of Loup Ventures said in an interview, noting the dip in margins were accompanied by price cuts to win market share. “It’s negative for today, but good for the long term given the EV market is nascent.”

Tesla did not give a specific number for how many cars it expects to deliver in 2021, but said that it anticipates beating last year’s 50% growth rate, which would mean more than 750,000 units. It delivered almost 500,000 vehicles globally in 2020.

Despite missing analyst income estimates, the results showed Tesla’s first full-year profit. The company has defied skeptics by achieving sustained growth and been rewarded with a record stock price and a $819 billion market capitalization, dwarfing other carmakers. Its success has helped spur a rally in shares of other companies with lofty EV strategies, both old and new.

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Tesla’s revenue hit $10.74 billion in the October-to-December period, surpassing analysts’ estimate for $10.38 billion and exceeding the $7.38 billion in the last quarter of 2019.

The company earns money by selling regulatory credits to automakers that need them to comply with carbon-emissions standards in California, Europe and elsewhere. Investors view this revenue as a double-edged sword because they want to know Tesla can be profitable from its core business: making and selling cars. Sales of regulatory credits were $401 million, up from $397 million in the third quarter.

Tesla said that it has been upgrading its factory in Fremont, Calif., to launch refreshed versions of its S and X models with new powertrains and an entirely new interior. A photo in the shareholder letter shows a small screen for passengers in the back seat. The first deliveries of the Model S began in 2012, and speculation about an overdue refresh have circulated for months.

Besides refreshing the S and X models, Tesla said the high-performance “Plaid” version of its flagship S sedan is now available for order on its website.

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