Tesla's stock has been on a rapid upward trajectory, reaching its highest close in over 13 months as the electric vehicle (EV) maker continues to bask in the glow of its third-quarter earnings report. Tesla shares rose by 2.8% on Friday to $267.79, putting the stock on track for its best finish since September 2023. The surge in Tesla's stock price is a continuation of the company's post-earnings rally, which saw a dramatic 22% rise in a single day following the release of its earnings report, marking the second-largest single-day gain for the stock since its initial public offering in 2010.
Tesla's third-quarter results caught many by surprise, especially short-sellers who had bet against the stock. The company reported revenue of $25.18 billion, just shy of analysts' expectations of $25.37 billion, but up 8% compared to the same period a year earlier. Tesla's adjusted earnings per share came in at 72 cents, far exceeding analysts' estimates of 58 cents. Despite slightly missing revenue expectations, Tesla's profit margins were buoyed by $739 million in revenue from environmental regulatory credits, along with $326 million from its Full Self-Driving (FSD) Supervised system.
Elon Musk, Tesla's CEO, expressed optimism during the earnings call, stating that he expects vehicle growth to reach 20% to 30% next year, driven by lower-cost vehicles and the advancements in autonomy. However, Musk's promises of autonomy have historically faced delays, with the CEO frequently missing deadlines. Despite this, Tesla remains committed to its vision of developing fully autonomous vehicles, with plans to start production of the Cybercab, a driverless robotaxi with butterfly doors, by the end of 2026.
Musk's bold forecasts and Tesla's unexpected earnings performance have reignited investor confidence in the company, resulting in a major boost to Musk's net worth. With the stock rally, Musk's wealth has increased by approximately $30 billion, bringing his total net worth to about $274 billion, according to Forbes. This puts him roughly $60 billion ahead of Oracle founder Larry Ellison, who holds the position of the world's second-richest person.
Tesla's performance has also led to increased optimism among analysts. Piper Sandler, which already had a buy rating on Tesla, raised its 12-month price target from $310 to $315, citing higher-than-expected deliveries and improved margins. Meanwhile, Wall Street's response to Tesla's earnings has led to a wave of analysts upgrading their outlook on the stock, with some seeing the potential for even further gains.
The post-earnings rally not only benefited investors but also dealt a severe blow to short-sellers. According to data from S3 Partners, short-sellers who had bet against Tesla's stock saw their profits for the entire year wiped out in just one day. Tesla's stock surged by $150 billion in market value on Thursday, marking its biggest one-day jump since 2013. Short-sellers took an estimated mark-to-market loss of $3.5 billion, erasing the $1.7 billion profit they had amassed earlier in the year. Now, short positions are down $1.8 billion for 2024, as the bullish sentiment around Tesla grows.
Despite the strength of Tesla's stock performance, competitive risks remain, particularly in the EV market. In China, domestic automakers such as BYD and Nio have been ramping up their sales, presenting significant competition to Tesla. Meanwhile, in the U.S., traditional automakers like Ford and General Motors have begun to make strides in the EV space, even as they face setbacks in electrification commitments. While Tesla's stock remains around 35% below its all-time high reached in 2021, the company's ability to maintain its lead in a crowded and rapidly evolving EV market will be crucial.
