Tesla Motors (NASDAQ: TSLA) has been on a roll lately. For instance, Elon Musk sometimes becomes the world’s richest man because of the fluctuations of Tesla’s stock prices.
In addition, Tesla (TSLA) has begun production of the Model Y crossover in China, and they have picked a site for an Indian Gigafactory. They will locate the India Gigafactory in Karnataka, the same state as Bangalore (Bengaluru), Bloomberg claims.
Model Y production began in Shanghai in January, CNBC reports. Tesla built 499,550 electric vehicles in 2020, CNBC notes. Hence, Tesla almost achieved its 2020 production goal of 500,000 vehicles. Musk hopes to expand production to 20 million vehicles by 2030.
Impressively, Tesla produced 179,757 vehicles in the fourth quarter of 2020 and delivered 180,570 vehicles to customers in the same period, CNBC estimates. Thus, Tesla has become a serious automaker, but does it make money?
Does Tesla Make Money?
Yes, Tesla made money in 2020. Tesla Motors (TSLA) reported a quarterly gross profit of $2.066 billion and a quarterly operating income of $575 million on 31 December 2020.
Musk’s company made more money in 2020. The quarterly gross profit rose from $1.391 billion on 31 December 2019 and the quarterly operating income rose from $359 million on the same day.
Tesla is a fast-growing company. Stockrow estimates that Tesla’s revenues grew by 45.5% in the quarter ending on 31 December 2020.
In 2020, Tesla’s quarterly revenues grew from $7.384 billion on December 31, 2019, to $10.744 billion on 31 December 2020. Thus, Tesla is growing and makes money.
Importantly, Tesla reported six quarters of revenue growth, six quarters of gross profit growth, and six quarters of operating income growth on 31 December 2020. Hence, Tesla is a growing company.
How much Cash Does Tesla Generate?
Interestingly, Tesla (NASDAQ: TSLA) is a cash-rich company. Tesla had $19.384 billion in cash and short-term investments on 31 December 2020. In 2020, Tesla’s cash and short-term investments grew from $6.268 billion on 31 December 2019.
Tesla reported a quarterly operating cash flow of $3.019 billion and a quarterly ending cash flow of $4.898 billion on 31 December 2020. Tesla also reported quarterly ending cash flows of $5.897 billion on 30 September 2020 and $8.457 billion on 31 March 2020.
Predictably, Tesla also borrows enormous amounts of money. Tesla reported quarterly financing flows of $2.708 billion on 31 March 2020, $4.45 billion on 30 September 2020, and $2.692 billion on 31 December 2020.
Conversely, Tesla ended 2020 with less debt. Tesla had $9.607 billion in long-term debts on 31 December 2020. The long-term debts shrank from $11.634 billion on 31 December 2019.
Yes, Mr. Market Overvalues Tesla
Thus, Tesla (NASDAQ: TSLA) has some strong value characteristics. It generates enormous amounts of cash and pays its debts.
Finally, Tesla offered enormous value in the form of $52.148 billion in Total Assets on 31 December 2020. The Total Assets grew from $34.309 billion on 31 December 2019.
I think Mr. Market grossly overvalues Tesla. For example, the $796.22 Mr. Market paid for Tesla shares on 16 February 2021.
Additionally, I think Tesla’s share price growth is a bubble. I think Tesla stock is in a bubble because its share price rose from $171.68 on 18 February 2020 to $816.12 on February 12, 2021.
Interestingly, I think the $171.68 Mr. Market paid for Tesla on 18 February 2020 was a fair price. However, the $796.22 Mr. Market offered for Tesla on 16 February 2021 was ludicrous is ridiculous. Investors need to avoid Tesla because Mr. Market pays far too much for it.
Tesla’s secret weapon, the Semi
I think one of Tesla’s biggest moneymakers could be its’ all-electric Class 8 semi-tractor or semi.
The Tesla Semi could have a $150,000 base price and a 300 to 500 mile range, Teslarati claims. Musk told Joe Rogan that the semi could have a 500 kilowatt hour (kWh) battery pack.
I think the Semi could be Tesla’s greatest moneymaker because there will be high demand for it in countries such as India. My suspicion is that the electric car market in India will be small because Indians lack the money to buy one.
Statista estimates that India’s middle class had a median household income of $7,700 to $15,000 a year, in 2016, for instance.
On the other hand, I think there will be a massive demand for heavy trucks to move freight in India. Specifically, the Indian government will want to move freight without Middle Eastern oil. Tesla can meet that need.
Interestingly, the most valuable feature of the Tesla semi could one that has attracted little attention: Convoy Mode. Convoy Mode is an autonomous driving feature that allows a convoy of semis to operate like a train. Hence, one truck driver could theoretically “drive” a convoy as an engineer drives a train.
Tesla is one of the world’s leading automakers
Thus, a convoy of Tesla semis could take the place of a freight train. An interesting variation could be a passenger convoy mode for buses. Another potential use for Convoy Mode is the military, in particular, convoys of supply trucks.
Innovations such as Convoy Mode and the Semi show Tesla is now one of the world’s leading automakers and a major player in Tech. I think Tesla has the potential to make money in other businesses such as freight.
In the final analysis, I think Tesla is a terrific company with an overpriced stock. Investors need to avoid Tesla until Mr. Market prices it realistically.