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Tesla’s Surprise Profit Sends Shares Rocketing 20% Higher

Last Updated September 23, 2020 1:13 PM
W. E. Messamore
Last Updated September 23, 2020 1:13 PM

Tesla’s highly anticipated Q3 earnings report crushed expectations on Wall Street. Shortly after the closing bell Wednesday, the electric automaker reported net income of $1.91 per share . Analysts were expecting a loss of 46 cents per share. Piper Jaffray’s Alexander Potter forecast a 12 cent loss .

In after-hours trading, Tesla stock price accelerated like a Model S clearing 60 MPH from a standstill in 2.2 seconds. Shares of Tesla closed on the Nasdaq at $254 but surged more than 20 percent to $306 in late trading after the earnings report.

In the hour leading up to the report, Tesla stock had already climbed 12 percent. Although analysts were forecasting losses, and investors expected a decline in revenue growth, markets expected to learn something good.

Takeaways from Tesla Q3 Earnings Report

It’s not very often that Tesla reports a profitable quarter. This one marks the fifth quarterly profit for the company in over a decade .

After losing money again following its first back-to-back profitable quarters at the end of 2018 and beginning of this year, Tesla now expects “positive quarterly free cash flow going forward, with possible temporary exceptions,” concluding:

“We continue to believe our business has grown to the point of being self-funding.”

Last month, Tesla reported record third-quarter deliveries, but investors were keen to see how much profit Tesla could scoop from its increasing volume of sales. Revenues of $6.3 billion were in line with forecasts. Gross margins outperformed expectations at 18.9 percent vs. estimates of 17.7 percent .

China ‘Gigafactory,’ Model Y, and Smart Summon

That’s important as Tesla pivots its business model and makes massive capital investments in the Shanghai, China “Gigafactory.” 

“We are already producing full vehicles on a trial basis, from body, to paint and to general assembly, at Gigafactory Shanghai. We have cleared initial milestones toward our manufacturing license and are working towards finalizing the license and meeting other governmental requirements before we begin ramping production and delivery of vehicles from Shanghai.”

Tesla announced it’s ahead of schedule on Model Y production. The company expects to launch the light SUV in 2020. The company also reported that last month’s U.S. launch of Smart Summon saw the feature used 1 million times.