Tesla Total Debt is at $28 Billion: Will This Affect TSLA Stock Price?

Urian B., Tech Times 14 February 2021, 09:02 pm

The Tesla CFO notes that reducing debt is the company's priority as of the moment. Tesla's reported 2020 operating position still seems quite impossible to fault as the company had an annual revenue topping $30 billion and its first annual profit of $720 million. The company's annual deliveries of certain new vehicles approximately equal towards the said sum of some previous historical deliveries or 499,600 cars, according to 6park.news. The available capacity of the company now closes in on one million vehicles a year.

Elon Musk Tesla shares

Elon Musk notes that the revenue growth rate was quite unexpected. Wall Street, According to an article by HackerNoon, seems to feel like the company technically feels that the financial figures are not really worthy of Tesla's total market capitalization of about over $800 billion. After the previous earnings announcement, Tesla's total shares fell about 5% before proceeding to about 4%.

Tesla was able to deliver 499,600 vehicles as of last year. Both the low and mid-range Model Y and Model 3 have both contributed to the company's 90% of deliveries. Among them, the reported Model 3, with a whopping 137,000 sales, had actually become the top new energy vehicle sale around China back in 2020.

Tesla growth 2010 to 2020

Between both 2010 to the recent 2020, Tesla's total debt has grown over 70 times while also gearing ratio consistently a little above 75%. Back in 2018, Tesla's reported total debt interest expense has finally reached $663 million and is equivalent to about two-thirds of the company's annual loss.

In order to ease the debt pressure, Tesla has actually raised three different financing rounds back in 2020 being able to get a total of $12.3 billion. In the said earnings call, Zachary Kirkhorn actually put down "debt reduction" at the top of the given list. He then noted that they are expected to spend about $1.4 billion on debt reduction during the first quarter of this 2021.

TSLA stock price

Zachary Kirkhorn noted that the number could even increase as well as re-emphasized that completely reducing debt is still more important due to it being able to help with the interest expense. Although it is quite uncommon for car companies to reportedly have high gearing, BMW, Volkswagen Group, Daimler Group and also Mercedes-Benz have all been with gearing ratios above 70% during the past three years. The total debt has reportedly grown over the years.

The advantage of the traditional car companies, as noted by the article, is that they have a more robust cash flow and can easily dilute production costs much faster when driven by the whole scale effect. Tesla, on the other hand, has a market capitalization of over $800 billion and is worth the said other top 10 car companies combined. With TSLA stock raising in price and a market capitalization way over total debt, it remains to be seen if this would bother optimistic investors.

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Written by Urian Buenconsejo