Shares of Tesla Inc. fell more than 2% in the extended session Wednesday after the Silicon Valley car maker reported a lower-than-expected fourth-quarter adjusted profit, but sales came in above forecasts and the company said it expects its Model 3 production to reach a “sustained rate” of 7,000 vehicles a week by the end of the year.

Tesla

TSLA, +3.80%

 earned $139 million, or 78 cents a share, in the quarter, versus a loss of $675 million, or $1.75 a share, in the year-ago quarter. Adjusted for one-time items, Tesla earned $1.93 a diluted share, contrasting with a $3.04 loss a year ago. Revenue rose to $7.23 billion, compared with $3.29 billion a year ago.

Analysts polled by FactSet had expected the company to report adjusted earnings of $2.20 a share on sales of $7.12 billion.

Tesla will host a conference call with analysts at 5:30 p.m. Eastern, which MarketWatch is live-blogging.

The results were marred by the adjusted-earnings miss, but Tesla showed other strong fourth-quarter indicators, said Bill Selesky, an analyst with Argus Research.

Highlights for Tesla included falling costs, gross margins approaching the 25% goal, “strong and improving” December Model 3 volume, and the 7,000-vehicles-a-year goal for the Model 3 production rate, Selesky said.

“I expect the stock to trade lower on EPS, but not for long,” he said.

Tesla had warned of smaller profit in the quarter and announced more layoffs earlier this month, sparking a renewed bout of concerns about demand and margins. The company also ended its referral program, and CEO Elon Musk on Twitter suggested it was hurting margins.

Tesla in October hailed its ‘historic’ quarter, complete with a surprise third-quarter GAAP profit and sales that more than doubled in the year.

This week, the Financial Times reported that Saudi Arabia’s multibillion-dollar sovereign fund had sought to cut exposure to Tesla via a hedging deal.

Tesla shares have lost 11% in the past 12 months, which compares with losses around 5% and 4.1% for the S&P 500 index

SPX, +1.55%

 and the Dow Jones Industrial Average

DJIA, +1.77%

 , respectively.

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2019-01-30