The tepid investor reaction to the earnings report may have to do with the fact that the company’s profits are more reliant on non-core activities than on selling cars.
Tesla’s Regulatory Credit Boost: Excluding zero emission vehicle, or ZEV, credits, Tesla’s auto gross margin was 22%, well below the peak level of 25.5% in the third quarter of 2018, Needham analyst Rajvindra Gill pointed out. ZEV credits contributed $518 million in the first quarter.
Bernstein analyst Toni Sacconaghi said Tesla’s auto margins have largely hovered between 20% and 22% for each of the last seven quarters.
Pre-tax income, excluding credits, has been consistently near breakeven despite volume and revenues doubling, he said.
Bitcoin Lifts Tesla’s Bottom Line: Tesla bought $1.5 billion of Bitcoin in the quarter and sold about 10% of the position, fetching it a profit of $101 million, Needham’s Gill said.
The company is looking at Bitcoin for liquidity and value storage purposes, as it believes the crypto offers a better alternative to traditional money market instruments, the analyst said.
The price of Bitcoin jumped about 104% in the first quarter to $58,918.83.
If not for the ZEV credit and the profits from the sale of Bitcoin, Tesla would have reported a GAAP loss of $181 million, he said. This is opposed to the $438 million in GAAP gross profit the company earned for the quarter.
Needham’s Gill has an underperform rating on Tesla shares.
TSLA Price Action: At last check, Tesla shares were down 2.64% to $718.68.
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