Tesla Shares Skyrocket After Unexpected Profitability | Financial Buzz

Tesla Shares Skyrocket After Unexpected Profitability

Tesla, Inc. (NASDAQ: TSLA) reported its third quarter financial results after the closing bell on Wednesday. The electric vehicle manufacturer smashed analysts’ earnings estimates after reporting a profitable quarter.

Tesla shares skyrocketed by as much as 20% shortly after reporting its quarterly results. 

For the third quarter, Tesla reported earnings of USD 1.86 per share on revenue of USD 6.3 Billion. Refinitiv analysts expected earnings loss of USD 0.42 per share on revenue of USD 6.33 Billion.

Despite the profitable quarter, Tesla’s revenue slipped by 8% year-over-year, while net income decline by 34%. However, quarter-over-quarter, Tesla reported a 273% growth in net income compared to a loss of USD 198 Million in the second quarter of 2019. 

Tesla noted that the decrease in year-over-year revenue is largely due to the number of leased vehicles, which has tripled. Model 3 mixes have increased which led to a reduction in Tesla’s average selling price. The ASP reduction is primarily due to the launch of the Standard Range trims of the Model 3 and pricing actions earlier in the year.

Meanwhile, the Company said it was able to return to profitability by improving its operation efficiency, including reductions in manufacturing and material costs and continued improvements in vehicle quality. 

During the quarter, Tesla witnessed Model 3 production rates increase by 50% year-over-year. Additionally, Model 3 deliveries grew by 42% in the same period. However, Model S and X production rates fell by 39%, while deliveries edged lower by 37%. 

Tesla said it is positioned to accelerate its growth with its Gigafactory Shanghai, Model Y launch, as well as build rate on its existing production lines. The Company expects these to increase its total vehicle deliveries and associated revenue. Moreover, Tesla is preparing to announce the location of its European Gigafactory, where the Company plans to produce electric vehicles by 2021. 

The Company mentioned its in investor update that the Model Y launch is ahead of schedule. Tesla is now expecting to launch the Model Y by as early as next summer. Additionally, Tesla is also expecting to manufacture limited amounts of Tesla Semi trucks next year. 

Due to the stronger-than-expected quarter, Tesla said it is confident it will deliver over 360,000 vehicles this year. Tesla also expects to report positive GAAP net income due to the launch of new products and continuous volume growth, capacity expansion, and cash generation.