Tesla’s (NASDAQ:TSLA) revenue growth of 45.5% from last year is impressive. By comparison, its GAAP EPS of 24 cents is not. This missed consensus estimates by 54 cents.
Why did TSLA stock not fall by much after results?
Shareholders may point to the positive earnings on Tesla’s expansion as a reason to keep holding shares. Yet automotive margin fell to 24.1%, down from 27.7% sequentially. Ramping up production of Model 3 in China to over 5,000 cars a week should lower costs.
As margins expand, profits will grow, too. For example, Tesla started production of Model Y at Gigafactory Shanghai in less than a year after breaking ground on that expansion.
Tesla posted a healthy level of cash and cash equivalents of $19.4 billion, up from $6.3 billion in 2019. Also, because its share price rose by 10 times from yearly lows, it may sell shares anytime to raise cash, if needed. Liquidity is abundant, suggesting that any drop in shares will prove temporary.
The fan base for TSLA stock is still very strong. Any dip will be viewed as a buying opportunity, limiting the downside. Investors uncomfortable with the company’s stock valuation should avoid it. Momentum investors may buy the stock if it dips down to key moving averages. Chances are good that if markets rally, Tesla will rally by even more.
