Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage.
While not a holding in any of the portfolios currently, Tesla is often of interest to most investors and therefore warrants an update.
The third-quarter earnings report exceeded analyst expectations, demonstrating the company’s strong operational performance. The electric vehicle maker posted adjusted earnings per share $0.72, significantly higher than the consensus estimate of $0.60. This also marked an improvement over the same period last year, where Tesla reported an EPS of $0.66. Revenue reached $25.18 billion, up 7.8% year-on-year, though it narrowly missed the market estimate of $25.43 billion.
One of the standout metrics from the report was Tesla’s gross margin, which rose to 19.8%, beating the projected 16.8% and improving on last year’s 17.9%. This increase was a testament to Tesla’s ability to optimise its cost structure and enhance profitability, despite the challenges of scaling production and facing ongoing supply chain issues. Operating income also surged to $2.72 billion, a 54% year-on-year increase, far exceeding analyst expectations of $1.96 billion. This highlights the company’s focus on maintaining operational efficiency even as it invests heavily in growth.
Free cash flow saw a significant jump, reaching $2.74 billion compared to just $848 million in the same period last year. The higher cash flow was driven by increased vehicle deliveries and strong performance in Tesla’s energy storage division, which is expected to more than double its deployments year-on-year. Tesla’s capital expenditure also rose by 43% to $3.51 billion, reflecting the company’s continued investment in expanding its production capabilities, particularly with its new Shanghai Megafactory set to come online early next year.
A major milestone for Tesla this quarter was the profitability of the Cybertruck, which achieved a positive gross margin ahead of the projected timeline. Additionally, regulatory credits and the company’s energy business played a key role in boosting profits. Revenue from regulatory credits, which Tesla sells to other automakers to help them meet emissions standards, contributed $739 million to Tesla’s top line, further strengthening its financial position.
Looking ahead, Tesla expects slight growth in vehicle deliveries for 2024, with Chief Executive Elon Musk confident that the company’s plans for new vehicle launches remain on track. Musk also hinted at future opportunities, including a potential expansion into autonomous vehicle ridesharing in Texas and California, which could begin as early as next year, pending regulatory approval.
Tesla’s shares surged 12% in after-hours trading following the earnings report, reversing much of the stock’s earlier decline this year. Investors remain bullish on Tesla’s long-term prospects, buoyed by the company’s innovation pipeline, which includes plans for more affordable autonomous vehicles and the continued scaling of its energy storage business.
Overall the results highlight that Tesla delivered strong financial performance for the third quarter, beating EPS estimates and showing improvements in key areas such as operating income and free cash flow. While revenue fell slightly short of expectations, the company’s focus on growth in emerging sectors like energy storage and autonomous driving is expected to drive future profitability.
