Tesla shares surged in premarket trading on Thursday, rising as much as 16.73%, following the company's third-quarter earnings report that exceeded Wall Street's expectations in several key areas. Despite a slight revenue miss, investors responded positively to strong growth in vehicle deliveries, higher-than-expected margins, and optimism from CEO Elon Musk about the company's future growth prospects. Tesla's stock gain, which added tens of billions of dollars to its market valuation, reflects renewed confidence in the automaker after a challenging period.
The electric vehicle (EV) giant reported revenue of $25.18 billion for the third quarter, slightly below the $25.4 billion forecast by analysts but up from $23.40 billion in the same quarter last year. Tesla posted adjusted earnings per share (EPS) of $0.72, surpassing the consensus estimate of $0.60. Net income came in at $2.5 billion, and free cash flow reached $2.9 billion, signaling improved profitability. Tesla's gross margin, a closely watched metric in the auto industry, was 19.8%, far exceeding the expected 16.8%.
In a statement accompanying the earnings report, Tesla emphasized its strong performance in vehicle deliveries. "We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes," the company said. Tesla delivered 462,890 vehicles in the third quarter, marking a 6.4% increase from the previous quarter. Although deliveries slightly missed Wall Street's expectations of 463,897 units, the number still represented growth compared to the same period last year, when Tesla delivered 435,059 EVs.
Elon Musk, during the earnings call, predicted that Tesla's vehicle volume could grow by 20% to 30% next year, though he described these figures as a "best guess" given potential market fluctuations. Musk also reiterated Tesla's commitment to bringing more affordable models to market, aiming to begin production of a cheaper electric vehicle in the first half of 2025. "We are on track for production of new vehicles, including more affordable models," Musk said, offering optimism about the company's future product lineup.
Another highlight from the report was the update on Tesla's much-anticipated Cybertruck and its autonomous vehicle ambitions. Tesla confirmed that production of its Cybertruck is ramping up, with the vehicle achieving a positive gross margin for the first time in the third quarter. Musk noted that the company aims to produce between 2 million and 4 million units annually once full production begins, with volume production of the Cybertruck expected by 2026.
Additionally, Musk provided an update on Tesla's efforts in autonomous driving, specifically its robotaxi initiative. The company has been testing its robotaxi service, which allows employees to summon rides in San Francisco, albeit with safety drivers behind the wheel. Musk indicated that Tesla is targeting 2026 for large-scale production of its autonomous vehicles, including the recently announced Cybercab. "We expect to scale production of the Cybercab by 2026, with plans to eventually produce 2 million to 4 million units annually," Musk said.
Tesla's Energy Generation and Storage business also performed well, achieving a record gross margin of 30.5% in the third quarter. The company expects this segment to more than double year-over-year in 2024, adding another revenue stream as Tesla continues to expand its business beyond electric vehicles.
Despite the positive news, Tesla lowered its full-year outlook, now forecasting revenue of $91.1 billion, down from its previous estimate of $93 billion. The reduction is largely attributed to macroeconomic uncertainties, competition from other automakers, and the evolving landscape of the EV market. Still, investors seemed unfazed by the lowered guidance, focusing instead on the company's strong quarterly results and Musk's optimistic forecasts for future growth.
Shares of Tesla had fallen roughly 11% earlier in the month following the company's unveiling of its robotaxi, dubbed the Cybercab, at its "We, Robot" event in Burbank, California. Investors were left wanting more details about the product and its development timeline. However, the upbeat earnings report and Musk's reaffirmation of Tesla's long-term vision seemed to restore investor confidence.
Analysts have reacted favorably to the earnings report, with several raising their price targets for Tesla stock. George Gianarikas, an analyst at Cannacord Genuity, reiterated his buy rating and increased his price target from $254 to $278. "Tesla has taken its first major step toward recovery," wrote Wedbush Securities analyst Dan Ives, who maintained his $300 per share price target.
