Tesla Inc. (TSLA) delivered a resounding victory in its third-quarter earnings, sending its stock soaring 12.10% in after-hours trading. The electric vehicle giant exceeded expectations across the board, prompting analysts to revise their forecasts and investors to celebrate the company’s resurgence.
Gary Black, Managing Partner of The Future Fund LLC, described the results as a ‘clean beat,’ highlighting Tesla’s remarkable performance on key metrics. The company reported adjusted earnings per share of $0.72, surpassing both Wall Street estimates of $0.58 and Black’s own projection of $0.56.
Several factors contributed to this impressive earnings beat:
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Automotive Gross Margins:
Excluding regulatory credits, Tesla’s automotive gross margins reached 17.1%, comfortably outpacing Wall Street estimates of 14.9%. This indicates a significant improvement in the company’s ability to manage costs and generate profits from its core business.*
Energy Division Growth:
Tesla’s energy division continued its upward trajectory, with profits increasing by 90%. Margins expanded to 30.5%, a notable improvement from 24.4% year-over-year.*
Service Segment Expansion:
Tesla’s service segment experienced impressive growth, with profits rising by 91%. Margins increased to 8.8%, up from 6.0% year-over-year, showcasing the company’s ability to generate recurring revenue from after-sales services.*
Cost Efficiency:
The company’s cost of goods sold per unit reached a record low of $35,100, marking a 6.4% year-over-year decrease. This demonstrates Tesla’s continued focus on optimizing its manufacturing processes and supply chain.*
Regulatory Credits:
Tesla’s regulatory credits, while subject to ongoing scrutiny, reached $739 million, surpassing estimates of $536 million.Black acknowledged that his team’s initial estimates had been too conservative, particularly regarding Tesla’s auto loan subsidies. He emphasized the importance of CEO Elon Musk’s bold vision for Tesla’s future, highlighting the company’s fiscal year 2025 delivery growth guidance of 20-30% year-over-year. This significantly exceeds Wall Street’s current projection of 14% growth, indicating a strong confidence in Tesla’s ability to maintain its aggressive growth trajectory.
The market responded enthusiastically to these positive developments, with Tesla’s stock price experiencing its largest surge since April 2024, when it rose 12% following first-quarter earnings. The current quarter’s positive surprise, driving an 11% after-hours gain, was attributed to the company’s strong fundamentals, particularly the significant improvement in automotive gross margins.
Based on these robust results, Black expects analysts to revise their fiscal year 2024 adjusted earnings per share estimates from $2.26 to at least $2.40, reflecting the growing optimism surrounding Tesla’s future prospects.
Despite this impressive performance, Musk recently shut down the idea of developing a conventional $25,000 car, reinforcing his commitment to an all-autonomous future for the EV maker. This strategy, while ambitious, appears to be resonating with investors, who are increasingly embracing Tesla’s long-term vision.
Wall Street analyst Dan Ives believes that the worst may be behind Tesla, citing the significant turnaround in gross margins as a key positive indicator. The market is clearly betting on Tesla’s ability to navigate the challenges of the automotive industry and emerge as a leading force in the future of mobility.
