Financial Performance

Tesla Shares Jump 20% on Surprise Q3 Profit

The car maker said it removed substantial costs from its business during the quarter and delivered a record number of vehicles.
Matthew HellerOctober 24, 2019
Tesla Shares Jump 20% on Surprise Q3 Profit

Tesla Motor posted a surprise quarterly profit and assured investors that it was on track to achieve “sustained, industry-leading profitability.”

For the third quarter, the automaker had net income of $143 million and adjusted earnings of $1.86 per share. Analysts had expected a loss of 24 cents per share but Tesla’s bottom line benefited from its cost cutting, with operating expenses reaching the lowest level since production of the Model 3 began.

Gross margin was 22.8%, down from a year earlier but a 3.9-percentage point improvement from the second quarter even though Tesla has reduced the average selling price of the Model 3.

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News of the earnings sent Tesla shares up 20.1% to $254.68 in after-hours trading Wednesday. “We returned to GAAP profitability in Q3 while generating positive free cash flow,” the company said in a news release. “This was possible by removing substantial cost from our business.”

Tesla also delivered a record more than 97,000 vehicles to customers in the third quarter and reaffirmed it is “highly confident” about exceeding 360,000 deliveries in 2019. Its new gigafactory in Shanghai, China, is ready for production after costing 65% less to build than its Model 3 production system in the U.S.

“Continued volume growth and cost control are an important combination for achieving sustained, industry-leading profitability,” Tesla said.

But MarketWatch noted that after generating more than $300 million in profits in the third quarter of 2018, Tesla earnings fell to $100 million in the next quarter before diving to a loss of more than $1 billion in the first half of this year.

“The question Tesla investors are left with is if the company will be able to sustain the current profitability — which was mostly derived from cost-cutting and emissions credits — at the same time it is building out the new Model Y and a brand-new gigafactory in China,” MarketWatch said.

Tesla’s revenue fell to $6.3 billion in the third quarter, missing analysts’ estimates and down from $6.8 billion a year earlier. “The stock is popping because of gross margin,” Ross Gerber, president of fund manager Gerber Kawasaki, told the Los Angeles Times.


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