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Tesla Reports Third-Quarter Profit That Beats Market Expectations (cnbc.com)

Posted by BeauHD on from the surprise-surprise dept.

Rei writes: When Tesla announced late last year that it was targeting sustained profitability in the second half of 2018, reaffirming this target throughout the year, the markets reacted with skepticism. Indeed, despite repeated insistence that the company had no need for a capital round, news analysts have treated the concept of Tesla dilution to raise more capital as inevitable and urgent to pay off convertible bonds next spring, even suggesting insidious theories that the reason it hadn't was that it "couldn't."

Well, today Tesla put the doubts to rest with a blockbuster Q3 report -- not simply eking out a profit and small free cash flow growth, but $2.92 per-share profit and $881 million free cash flow -- almost raising the entire value of their convertible bond debt in a single quarter. While many were skeptical about Tesla's claims that it would go from near zero profit margin on Model 3s to their claimed target of 15%, Tesla instead hit a 20% margin on the Model 3 (now the highest-revenue car in the U.S.), with a 25.8% overall automotive gross margin. This was all achieved with only $52 million worth of zero-emission vehicle credits claimed this quarter. While Tesla bears will likely claim that this quarter was a one-off that won't be repeated, Tesla reiterates guidance for sustained profitability from herein, barring a force majeure event.

11 of 195 comments (clear)

  1. Waiting to hear... by MachineShedFred · · Score: 4, Insightful

    I'm waiting to hear how Tesla is losing money on each car it sells, such as some people have been saying around here (FALSELY) for months. If they lose money on each car they sell, how did they wildly beat all the analysts by selling more of them?

    When everyone is telling you that you are wrong, sometimes it's a good idea to gain a little objectivity and at least examine the possibility that you actually are wrong.

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    1. Re: Waiting to hear... by Rei · · Score: 4, Insightful

      Completely contradicted by the report (whether you want to talk gross profits or net profits), but hey, thanks for playing.

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    2. Re: Waiting to hear... by AvitarX · · Score: 4, Insightful

      I doubt that.

      The demand for gasoline range EVs with a huge quick charge network seems to be pretty high (see the way Tesla dominates at the price points they're able to make cars for leading me to believe that once one breaks the 250 or so mile threshold people relax a bit), and the model 3 hasn't even reached out globally, where EVs are doing pretty decent overall.

      Tesla does seem to be poised to be a top tear EV manufacturer in the long run, and are likely demonstrating that they are worth investing in to stick around (debt not equity) at this point.

      EVs are poised to be huge (once they become cheaper than regular cars, which will likely be in the next few years as gasoline engines continue to become more complex and EV components drop in price) and Tesla is poised to be a top tier competitor.

      Do I think they're worth more than GM right now? no

      I think at this point they'll stick around though, I won't be really confident until they have a smooth roll-out of a model though.

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    3. Re:Waiting to hear... by dgatwood · · Score: 4, Insightful

      Tesla had its best quarter in a while. Hopefully, it can continue to execute in manufacturing cars and meet future debt payments. It's not out of the wood yet, but the direction looks good. A strong, successful Tesla will be good for consumers, the car market, and even for other car companies.

      However, since it's Tesla and Musk, the report stretches facts somewhat. "Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume." Well, that's technically true, if you exclude the top-6(!) selling vehicles in the US. That is, if you exclude the 65-70% of the car market represented by trucks and SUVs, which are technically not cars, then the Model 3 is the top revenue seller. But, that doesn't sound as impressive, even though it actually is.

      Agreed. For a car company that didn't exist twenty years ago, and whose market share was within the margin of error five years ago, even being #11 is pretty freaking amazing.

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    4. Re: Waiting to hear... by Anonymous Coward · · Score: 3, Insightful

      The point is that the naysayers were ignoring how much of the loss was one time costs (to work out production problems, also I think some was to shed dead weight) and also ignoring the 13k cars produced and not sold thus extending the tax rebates, but also counting towards sales and income. (Ignoring, except when it came to talking about how demand was shrinking and how bad things were that Tesla hadn't been able to sell all these cars.) And since tesla is run exactly like a Business 101 class's widget-factory-example, if you lose money selling x widgets, you'll lose more money by selling x+y widgets, right? Largest loss in tesla history, obviously going down the tubes next quarter.

      Well wrong, now all of sudden it becomes a lot more obvious this was all planned, the one time costs didn't come back, sales are up, and what can the naysayers say now? Oh it was a big trick, Tesla made a lot of extra cars last quarter (hint: the same cars that "failed to sell" last quarter) to pad this quarter's numbers, so don't fall for it, it's all a con job, next quarter will be terrible, WAIT! is that a wookie?!?!!

    5. Re: Waiting to hear... by Rei_is_a_dumbass · · Score: 0, Insightful

      They do not have 400,000 pre order. A reservation is not an order. The vast majority of those reservations were canceled. And only 20% were turning into actual orders.

  2. Can somebody count for me? by AlanObject · · Score: 4, Insightful

    I actually pay attention to all the Tesla/Musk/Tesla/Musk critics out there and follow their arguments about how the company is going to crash and burn and Musk is delusional and the technology won't work and the production can't work and the quality is crap gasoline is actually greener and cheaper and and the major automakers are going to bury them and the workers have reverted to savagery and yadda yadda.

    I have been following all that for, what, five years now? How many portentous pronouncements of Tesla and/or Musk's demise has there been? I have lost count.

    A few days ago my e-trade board delivered this little news nugget:

    Citron Research, which has previously advocated short positions on Tesla, says it has changed course, and that the electric car maker is "destroying the competition, as Citron makes the case for why it's taking a long-term view.

    So apparently there are short sellers out there will actually fold up the tent for another from-scratch assessment. Granted, they were wrong before so they could be wrong again. Tesla could still crash and burn or at least hit a major bump in the road. But if it does it will have nothing to do with what the chronic naysayers that post here say.

    1. Re:Can somebody count for me? by Rei · · Score: 3, Insightful

      Tesla aftermarket is currently $316,80. 1 year ago Tesla was $320,87. You're comparing market close (aka, from before the Q3 report).

      Tesla is one of the few major stocks that's doing well while the markets are getting hammered. As it should. In a recession, demand-limited companies (aka, most companies) suffer, but supply-limited companies (like Tesla) thrive. Life actually gets easier for them, as their feedstocks, parts, shipping, contractors, etc all get cheaper.

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  3. Re:There are some problems by Anonymous Coward · · Score: 4, Insightful

    As long as that doesn't affect people's willingness to buy new Teslas, those aren't really immediate problems for the company.

  4. That statement doesn't match the term by SuperKendall · · Score: 4, Insightful

    TSLA longs lost over 17%

    While they may be DOWN by that much (but are not, see aftermarket) by definition "longs" have lost nothing... because if they are long, they are holding not selling.

    I bought some shares in the middle of the year but I have "lost" nothing because why on earth would I sell? The end game is way north of $400, by the end I will have made quite a lot on TSLA (and some of it I bought longer ago when it was a lot cheaper).

    As a long investor what I do is pick stocks that I think have lots of potential, put money into them, and maybe look a few times a year to see how things are going. That's how you long, not bailing out at the first sign of any dip. If you choose well the dips fade away and you have mostly growth across a portfolio. Maybe someone doing day trading is making more but I'm pretty sure I'm leading a less stressful life.

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  5. Long Term by JBMcB · · Score: 3, Insightful

    No, but they are long term issues that affect customer loyalty. There are rumblings amongst Tesla owners about service issues. In-warranty service is slow. Out-of-warranty is slow AND super expensive. Like $900 to fix a door handle. Dealerships are known for stiff markups, but $900 to fix a door latch is usury.

    https://forums.tesla.com/forum...

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