Tesla is Profitable and Stock is Up

October 25, 2019
661 Views

It has been some weeks since we’ve had exciting news from Tesla (NASDAQ: TSLA), but the company has hit the headlines again with a return to profitability in the third quarter.

The electric vehicle and alternative energy company beat the Wall Street estimates and stock is now up 16.63% when tracking data over the last five days.

Here’s what investors need to know moving forward.

Analysts Got it Completely Wrong on Tesla Earnings

Most top analysts predicted that Tesla would report a loss from the third quarter of 2019. The company instead revealed adjusted earnings per share of $1.86, blowing out the Wall Street consensus. Revenue was slightly down on the estimate of $6.52 billion, with $6.30 billion reported. Considering the profitability, many investors will be willing to overlook this.

The performance was driven by record deliveries of Model 3, Models S, and Model X vehicles. Tesla delivered a total of 97,000 vehicles over the period. 79,600 of those deliveries were the popular Model 3. This compares favorably to the 84,000 vehicles that were delivered in the same quarter last year.

The company has a strong outlook for the 2019 fiscal year. This blowout quarter is expected to contribute to total vehicle deliveries in the range of 360,000 to 400,000. If this figure is achieved, it will represent 45% to 65% year over year growth in deliveries.

The company has also set a target for 2020, estimating that it will be able to produce 500,000 vehicles globally.

China is Key to Tesla’s Expansion

Executives are confident partially because of the new Shanghai Gigafactory in China. This will expand the company’s manufacturing base and give it easy access to the world’s fastest growing electric vehicle market. The Chinese factory is ahead of schedule and is already producing vehicles as part of a trial phase. It will enter full production by 2020.

By manufacturing in China, Tesla will avoid trade and legal barriers. Expanding its global manufacturing footprint was an especially critical move, considering how long the trade war has dragged on.

Tesla shares are now at their highest since March, and there could be more movement in the coming days. Short sellers who are notoriously skeptical of Tesla stock have lost out, but long-term investors who have confidence in the electric vehicle market have realized significant gains this week.

Tesla’s investment viability will become clearer as earnings are revealed in the following quarters.

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