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Tesla's drive to S&P 500 isn't powered by car sales alone

Carbon credit deals boost company to fourth straight quarter of profits

Tesla defies naysayers -- for now.   © Reuters

TOKYO -- Tesla added more to its market capitalization than the entire valuation of Nissan Motor in a few hours Wednesday after announcing a fourth straight quarter of profits, avoiding a disappointing earnings result that could have triggered a broad sell-off in global stock markets. 

The surge added roughly $18 billion to Tesla's market cap, which was already the highest among global automakers.

Investors were watching closely to see whether the electric-vehicle maker turned an April-June profit. This would mark a key step toward joining the S&P 500 index, since one requirement is that a company must cumulatively be in the black for four quarters. 

So-called Robinhooders -- retail investors on the Robinhood stock-trading platform -- snapped up the shares in hopes that inclusion in the S&P would generate an additional $30 billion or more in demand for Tesla stock from institutional investors.

Tesla reported a $104 million net profit in a dramatic turnaround from the year-earlier $480 million loss -- a win for the early risk-takers.

But questions arise from a closer look at the results. To sell cars in California and several other U.S. states, automakers must either have zero-emissions vehicles make up a certain percentage of sales or buy regulatory credits from other companies. Tesla appears to have eked out an April-June profit thanks largely to selling these credits.

Tesla's automotive revenue totaled $5.18 billion for the quarter, down 4% on the year but up 1% from the previous three months. Of this, credit sales accounted for $428 million. This figure increased nearly fourfold from a year earlier and 21% compared with the preceding quarter.

Credit sales accounted for 8.3% of Tesla's automotive revenue, compared with 2.1% a year earlier and 6.9% in the preceding quarter.

Tesla reported 90,891 vehicle deliveries for the April-June period. This represents a 3% increase on the quarter but comes in 19% below October to December -- the strongest quarter in the past four. Even taking into account the impact of U.S. production halts over the coronavirus, Tesla's vehicle sales are not trending toward the kind of dramatic growth the stock market appears to be pricing in.

The ranks of Robinhooders owning Tesla stock recently increased by 13,000 and hit a record high of more than 500,000, according to the Robintrack service that follows trading on Robinhood. But uncertainties still loom over the retail-driven boost in the shares.

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