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On Thursday, $Tesla Motors(TSLA)$ ’s stock skyrocketed by 22%, marking its best single-day performance since 2013, following a better-than-expected earnings report.
Strong Earnings Report
Tesla reported Q3 revenue of $25.18 billion, slightly below analysts’ expectations of $25.37 billion but still an 8% increase from the previous year. The adjusted earnings per share (EPS) came in at $0.72, surpassing the average forecast of $0.58.
JPMorgan analysts noted, “Given that investors have gotten used to Tesla's earnings missing expectations, we expect this surprise to trigger a strong positive response on Thursday.”
Tesla’s profit margin was bolstered by $739 million in environmental regulatory credits. Analysts at JPMorgan pointed out that this is a “potentially unsustainable driver” of profits.
U.S. automakers must acquire a certain number of regulatory credits each year. If they fall short, they can purchase credits from others. Tesla has a surplus because it only produces electric vehicles.
The company also benefited from its Full Self-Driving (FSD) system. CFO Vaibhav Taneja revealed in the earnings call that FSD contributed $326 million in revenue this quarter, especially after its rollout on the Cybertruck and the introduction of a new feature called “Actually Smart Summon.”
Optimistic Growth Forecasts
Elon Musk expressed his “best guess” that vehicle growth could reach 20% to 30% next year, driven by “lower-cost cars” and the rise of autonomous driving. Analysts surveyed by FactSet expect delivery growth of about 15% by 2025.
Morgan Stanley analysts, who recommend buying Tesla stock, deemed Musk's 2025 delivery growth prediction “possible.” Their estimate stands at 14%.
However, they emphasized that this depends on Tesla’s ability to launch more affordable next-gen models, offer financing options, and improve features for better affordability.
Thursday's gain was the second-largest on record and the biggest since a 24% jump in May 2013. This surge erased Tesla’s losses for the year, leaving its stock up 3% in 2024, although it still trails the $.IXIC(.IXIC)$ 's 22% rise.
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