Tesla Inc.’s (TSLA) third-quarter earnings report has sent shockwaves through the market, revealing a significant turnaround in gross margins and prompting optimistic outlooks from analysts. The electric vehicle giant, despite facing recent challenges, seems to be back on track, with a ‘goldilocks’ scenario unfolding for bullish investors.
The company reported a total revenue of $25.18 billion for the third quarter, representing an 8% increase year-over-year. While this figure slightly missed analysts’ expectations of $25.37 billion, Tesla’s automotive revenue still rose by 2% to $20 billion compared to the same period last year. This growth, coupled with the rebound in gross margins, has sparked a wave of positivity among investors.
Dan Ives, Managing Director at Wedbush Securities, believes this marks a turning point for Tesla. “Tesla made a huge step in the right direction with a massive margin rebound and a strong outlook,” Ives stated on X (formerly Twitter). “The Tesla narrative positively changes for the Street looking ahead after this margin performance and delivery outlook.”
Ives, in an interview with CNBC Overtime, further emphasized the significance of Tesla’s gross margin recovery, highlighting its potential to benefit both the company and its investors. The margin improvement comes after several quarters of pressure due to aggressive price cuts across Tesla’s vehicle lineup. “The whole story is about gross margin,” Ives explained during the interview. “Showing the worst is in the rearview mirror… that gross margin is a goldilocks for any bull.”
While Tesla’s revenue missed the Street consensus estimate, the company remains committed to steady growth. CEO Elon Musk has consistently highlighted the company’s steady revenue growth over the years, describing it as “progress.” Despite this, Tesla continues to face challenges, with a former employee turned rival suggesting that autonomous vehicles, one of Tesla’s next growth phases, may not be released until the 2030s.
The market reacted positively to the earnings report, with Tesla Inc.’s stock closing at $213.65 on Wednesday, down 1.98% for the day. However, in after-hours trading, the stock surged by 12.10%. Year to date, Tesla’s stock has declined by 14.00%, according to data from Benzinga Pro.
This strong performance in the third quarter suggests that Tesla might be overcoming its recent struggles and positioning itself for future growth. The recovery in gross margins and the positive outlook from analysts indicate a shift in sentiment towards the electric vehicle giant. It remains to be seen if this positive momentum will continue, but for now, the ‘goldilocks’ scenario appears to be in play.
