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MarketWatch First Take: Apple justifies its super ranking, whereas Tesla … not a lot

The difference between two of America's most popular stocks, Apple Inc. and Tesla Inc., was clearly noticeable on Wednesday.

Apple
AAPL,
-0.77%
reported a record quarter with quarterly revenue of $ 111.4 billion, a jump of 20% driven by strong demand for products for home work and study, including the new 5G iPhone 12. Apple's shares fell nearly 3% hours after that, but held on to its stratospheric market cap of approximately $ 2.41 trillion.

Notable for the quarter was the fact that iPhone sales of $ 65.6 billion exceeded Wall Street's expectations of $ 59.5 billion. And the new iPhone wasn't even available for the entire vacation area. Dan Ives, an analyst with Wedbush Securities, described the quarter as a "jaw-blown" that exceeded even the most optimistic whispered expectations of analysts.

Even so, analysts seemed a little concerned about whether or not Apple could maintain this pace of growth in the face of these ever larger numbers. Toni Sacconaghi of Bernstein Research asked Apple CEO Tim Cook in the company's conference call what he thinks is a "realistic sales growth rate" for the next five years.

"Toni, as you know, we're adding some color to the current quarter, but not beyond that in terms of growth rates," said Cook. "So I'll answer that part of your question." In his preview of Apple's earnings, Sacconaghi asked, "The cycle seems relatively strong, but what's next with 31x [times 2021] earnings [estimates]?"

Cook pointed out that Apple still has "some leeway" to expand market share in many areas, especially in some emerging markets like India. Another outstanding performer was the company's service business, which set a record. Apple also has a quarterly dividend of 82 cents stock and an ongoing investor share buyback plan that justifies its high valuation.

In contrast, Tesla
TSLA,
-2.14%,
The company, which hit new highs in the past few months, disappointed investors by missing Wall Street's expectations despite managing to crowd out its sixth consecutive profitable quarter. Once again, Tesla hit that profitable quarter with $ 401 million in regulatory credit, a point that investors are debating a lot.

"My estimates for the fourth quarter are around $ 550 million in markups on energy loans and unusual items, which are likely to make up most, if not all, of Tesla's reported" profit "- like each of the Last five quarters, "he wrote Vicky Bryan, founder and CEO of Bond Angle, in a preview of Tesla's profits.

Continue reading about how Tesla is playing smoke and mirrors for profit.

Since October, the stock has more than doubled, reaching $ 880 per share at one point. It currently has a valuation of around $ 837 billion. On Wednesday, shares fell roughly 5% in after-hours trading as CEO Elon Musk attempted to rally the troops on the company's profit call and quarterly shareholders slide deck.

"2020 was a pivotal year for us on many levels," said Musk. "Despite a challenging environment, we have reached an important milestone in the manufacture and delivery of half a million cars." He said Tesla delivered almost as many cars as it produced.

On the flip side for investors, however, Musk & Co. noted in their letter to shareholders that they simplified the guidelines due to the large number of products the company produces. "Over a period of several years, we expect an average annual growth in vehicle deliveries of 50%," said Tesla. "In a few years we expect faster growth, which is what we expect for 2021."

These instructions were less accurate than in the past. For example, in the third quarter of 2020, Tesla said it had the capacity to deliver 500,000 vehicles and that has remained the company's goal for 2020.

Musk was also asked about his previous bullish predictions that Tesla would achieve full level 5 autonomy in 2021. He also predicted that the company would have fully self-driving robo-taxis by the end of this year.

"This is happening quickly because we have so much training data with all vehicles in the field and the software is improving dramatically," said Musk. He also said the holy grail right now is "auto-tagging" the video being processed by the vehicles, but he didn't really describe the timing or progress. "We're moving everything towards labeling," he said.

Last month, Tesla joined the venerable S&P 500
SPX,
-2.57%,
A move that automatically places the stock in a variety of index funds based on this list of established growth companies. But disappointment can add momentum to a stock, and those with strong valuations like Tesla are even more at risk.

At the end of Wednesday, the established Apple proved its ability, while Tesla again asked more questions about its high rise.

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