Tesla’s Strong Q3 Earnings Spark Stock Surge
Tesla (TSLA) outperformed predictions in its third-quarter earnings report, revealing an adjusted earnings per share of 0.72 cents, surpassing analysts’ expectations of 0.58 cents. Although revenue reached $25.18 billion—slightly below the forecast of $25.37 billion—the company’s stock soared approximately 20% following the announcement. Concerns over profitability have diminished, bolstered by a forecast of 20%-30% growth in vehicle sales next year, renewing confidence in TSLA stock.
Tesla’s Q3 Performance Overview
The recent earnings report solidified my favorable outlook for TSLA stock, demonstrating the company’s strength in the electric vehicle (EV) sector. Tesla’s revenue grew 8% compared to $23.35 billion from the same quarter last year. Net income climbed from $1.85 billion, or 0.53 cents per share, to approximately $2.17 billion, equating to 0.62 cents per share.
A significant contributor to Tesla’s profit margins was $739 million in revenue from automotive regulatory credits, earned by selling surplus credits to automakers that fail to meet regulatory targets. This margin improvement likely fueled the stock’s substantial post-earnings rally.
“This is clearly an indication that Tesla Chief Executive Elon Musk and his team are maintaining a focus on profitability while also planning for future growth,” noted analysts at Wedbush.
In the third quarter, Tesla delivered 462,890 vehicles, marking a 6% increase from the previous year, though this figure fell short of expectations. The total production reached 469,796 electric vehicles as of September 30. While earlier quarters saw declines, Tesla anticipates slight growth in vehicle deliveries for 2024 and plans to introduce more affordable models by mid-2025.
Insights from Elon Musk
A pivotal reason for the recent surge in Tesla’s stock is CEO Elon Musk’s insights shared during the earnings call. He predicted vehicle growth of 20% to 30% for the next year, driven partly by new low-cost vehicles and advancements in autonomous technology.
This projection exceeds analysts’ expectations of a 15% increase and 2.04 million deliveries. Musk also outlined plans for launching driverless ride-hailing services in Texas by 2025, with California potentially following. Additionally, he mentioned employees using a ride-hailing app in the Bay Area to test the services.
Moreover, Tesla’s Cybertruck has quickly climbed to become the third-best-selling fully electric vehicle in the U.S., with over 16,000 units sold in the third quarter, marking the first time the Cybertruck showed a positive gross margin.
Analyst Perspectives
According to TipRanks, Tesla stock holds a strong ‘Hold’ rating based on analysts’ assessments. The 12-month price forecast suggests nearly a 20% downside from current prices. The highest price target among analysts is $310 per share, while the lowest sits at $24.86, with an average of $207.83.
See more TSLA analyst ratings
Tesla’s popularity has prompted various sell-side analysts to weigh in on its recent earnings. “It’s tough to be anything but optimistic following today’s call,” remarked Piper Sandler analyst Alexander Potter, who holds a five-star rating from TipRanks.
Piper Sandler reaffirmed its Overweight rating for Tesla, maintaining a $310.00 price target due to a noteworthy quarter-over-quarter increase in gross margin.
Similarly, analysts at Deutsche Bank kept their Buy rating with a $295.00 price target on Tesla. They stated that the guidance provided could address worries about the company’s growth as it approaches 2025.
Is TSLA Worth the Premium?
In light of the recent discussions, there are numerous reasons to remain optimistic about Tesla stock. The company confirmed its goal of releasing a vehicle priced under $30,000 in early 2025. Elon Musk envisions every Tesla vehicle as a “robotaxi,” which significantly influences the premium currently attached to its market valuation, trading at 95 times the projected earnings per share (EPS) for 2025.
However, skepticism persists following the recent “We, Robot Day” event, where some doubt the feasibility of the robotaxi service being ready before 2030. Limited details about the project have raised concerns among investors. Analysts noted that achieving the ambitious robotaxi rollout will likely involve an extended regulatory approval process that could postpone its launch beyond Tesla’s initial timeline.
Furthermore, reports indicated that the event showcased robots that operated via teleoperation, suggesting they are not fully autonomous yet. This uncertainty adds to worries about the practicality of Tesla’s robotaxi service soon. Many investors view Tesla as not merely a car manufacturer but rather as a technology leader, prepared to pay a premium for a stake in its future.
Conclusion
Tesla’s third-quarter earnings exceeded expectations and fueled a 20% rally in its stock. Vehicle deliveries improved by 6% year-over-year, and gross margins also surpassed analysts’ estimates. Most importantly, CEO Elon Musk predicts a 20%-30% vehicle growth heading towards 2025, driven by more affordable models and advancements in self-driving technology. While optimism remains among analysts, concerns about the ambitious robotaxi timeline continue to loom. Overall, Tesla stock appears likely to maintain support in the near term as market worries about the company’s growth prospects ease.
Disclosure
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
