Tesla Shares Rise on Q3 Profit Beat

Tesla Inc.’s (NASDAQ: TSLA) shares skyrocketed after the electric vehicle manufacturer topped its third quarter earnings estimates. Shares were trading 10.23% higher during Thursday’s pre-market hours.

For the third quarter, Tesla reported revenue of USD 6.82 Billion, increasing 128.9% year over year and topping estimates of USD 6.33 Billion. The Company reported an adjusted earnings per share of USD 2.90, increasing from a loss of USD 2.92 per share last year and smashing analysts’ estimates of an earnings per share loss of 19 cents.

Tesla’s stronger-than-expected quarter was due to its Model 3 production and deployment numbers. Despite logistic and delivery issues, Tesla said the Model 3 was the best-selling car in the U.S. in terms of revenue and 5th in terms of volume. On average, Tesla produced about 4,300 Model 3 vehicles per week, delivering a total of 56,065 in the quarter. Production numbers fell within the range Tesla had forecasted in the previous quarter.

Tesla said that delivery and logistics were the biggest challenges within the third quarter but was able to quickly work around it by making improvements. One improvement was its expansion of direct deliveries as employees delivered vehicles to any location customers wanted.

Tesla said its Model 3 production stabilized within the third quarter, leading to stronger sales. Tesla was able to make improvements to its Model 3 without disrupting its production rates, as the Company produced 5,300 in the last week of Q3.

Labor hours per Model 3 decreased by more than 30% quarter over quarter, falling for the first time below the Model S and X levels. For the next quarter, Tesla will continue to focus on cost improvements while increasing its production rates.

Due to ongoing trade wars and tariffs, Tesla had to increase the price of its Model 3. The starting price for the Model 3 was USD 49,000 in the quarter, but the Company is working to bring the price to USD 35,000. In order to improve upon costs, Tesla offered customers a mid-size range version of the Model 3 which started at USD 46,000.

In order to increase the affordability of the Model 3, Tesla accelerated its manufacturing timeline in China. The Company is looking to bring parts of its production line in China to increase level of localization through local sourcing and manufacturing.

Tesla delivered a total of 27,710 Model S and X vehicles to customers, but the Company said demand still remained a challenge due to a 40% import duty on the vehicles.

Tesla was under pressure by investors, citing the Company’s profitability issue in the first half of the fiscal year. The Chief Executive Officer quelled investors during the Company’s second quarter financial results saying that it will deliver profitability to its shareholders.

For the fourth quarter, Tesla forecasts Model 3 production and deliveries to increase quarter over quarter. The Company expects gross margins for the Model 3 to remain stable in the fourth quarter due to manufacturing efficiencies and fixed cost absorptions. Tesla’s target of delivering 100,000 Model S and X vehicles remains the same.

4 Comments
  1. Geoff Smith 1 month ago
    Reply

    Fake numbers by $TSLA. All FCF is from Accounts payable increase and shifting Q3 expenses to Q2. Dream on…

  2. Glenn Jones 1 month ago
    Reply

    $TSLA can never stay below $300 for too long

  3. David Moadel 1 month ago
    Reply

    If you bought $TSLA call options on monday you would be up a lot right now lol

  4. Cassandra Bellanger 1 month ago
    Reply

    I’ll say it again. It feels like this last earnings release was just too perfect given all the chaos surrounding this company it’s founder @elonmusk. I’m a fan and I hope Tesla succeeds for the betterment of humanity but something is fishy here. $TSLA

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