Tesla shares soar 21% as surprise profit answers sceptics

By Akanksha Rana and Tina Bellon (Reuters) - Tesla Inc on Wednesday surprised investors by posting a profitable third quarter, boosted by record deliveries, cost cuts and improved production schedules for its new electric vehicle model, causing shares to soar in after-market trading. Shares rose nearly 21% to $307.12 after hours on the surprise news, crossing $300 for the first time since March 1. Tesla on Wednesday posted a cash balance increase to $5.3 billion (£4.11 billion).

Reuters October 24, 2019 05:06:40 IST
Tesla shares soar 21% as surprise profit answers sceptics

Tesla shares soar 21 as surprise profit answers sceptics

By Akanksha Rana and Tina Bellon

(Reuters) - Tesla Inc on Wednesday surprised investors by posting a profitable third quarter, boosted by record deliveries, cost cuts and improved production schedules for its new electric vehicle model, causing shares to soar in after-market trading.

Shares rose nearly 21% to $307.12 after hours on the surprise news, crossing $300 for the first time since March 1. Tesla on Wednesday posted a cash balance increase to $5.3 billion (£4.11 billion). The carmaker reported a profit of $1.86 per share, shattering analyst expectations for a loss of 42 cents per share.

The third-quarter results are an important milestone for Tesla and redemption for Chief Executive Elon Musk who had to step down as chairman after a series of scandals and investor doubts about Tesla's ability to withstand competition from larger, better capitalized global rivals.

Tesla's gross margins, an important profit indicator for investors, surpassed expectations and Tesla said it was "highly confident" in exceeding the low end of its yearly global vehicle delivery goal.

The carmaker said it had cut costs 16% on a yearly basis, citing improvements in operating efficiency and a reduction in manufacturing and material costs. Musk said on a conference call that operating costs were the lowest since Model 3 production started.

Tesla also expects to generally be cash flow positive as it has grown to the point of being self-funding. (Graphic: https://tmsnrt.rs/2MF6HHq)

But revenue fell nearly 8% to $6.30 billion in the quarter ended Sept. 30. Analysts had expected revenue of $6.33 billion, according to IBES data from Refinitiv.

In May, Tesla raised a record $2.7 billion in capital when investors scooped up a mix of new stock and convertible notes to boost its cash-depleted balance sheet.

With Wednesday's after-hours surge, Tesla's stock has reduced its loss year-to-date to 8% and added about $9 billion to its market capitalization.

But Tesla rallies have been short-lived before.

A year ago, Tesla gave a quarterly report that similarly smashed investors' expectations, igniting a rally that sent its shares 31% higher over the next two months, only to see the stock decline through much of 2019 over worries about corporate governance, profitability and demand for the Model 3.

Investors in the past have shown impatience with the company's serial failures to meet financial and production targets. Earlier this month, Tesla shares slumped after the company reported delivering 97,000 vehicles for the third quarter, just short of analysts' forecasts and only 2% ahead of the previous quarter.

But Tesla on Wednesday exceeded promises by billionaire Musk, who in July said Tesla would break even in the third quarter and turn a profit by the end of 2019.

The company has said it plans to deliver 360,000 to 400,000 vehicles for all of 2019, and on Wednesday said it was "highly confident in exceeding 360,000 deliveries this year."

Analysts have questioned how rapidly Tesla's vehicle sales will grow as government subsidies for electric vehicle purchases dwindle in the United States, China and other markets. U.S. federal tax credits for Tesla vehicles were cut by half on July 1 and will disappear by the end of the year.

Tesla also said production of its new electric SUV Model Y and its Model 3 vehicle factory in Shanghai were ahead of schedule. Model Y production is expected to launch by the summer of 2020, while production of full vehicles on a trial basis was already underway in Shanghai, Tesla said.

"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," the company said in a statement.

Tesla has said it aims to produce at least 1,000 Model 3 cars a week at the new Chinese factory by the end of this year, but it is unclear when it will meet year-end production targets due to uncertainties around orders, labour and suppliers.

The electric car maker's net income attributable to common shareholders was $143 million, or 78 cents per share, for the third quarter, compared with $311 million, or $1.75 per share, a year earlier.

Musk is trying to contain costs while spending on major new initiatives.

Besides working on its new Model Y and Shanghai factory, Tesla is also developing a gigafactory in Europe, a Semi truck, an electric pickup truck, a new generation of the Tesla Roadster and automated driving features.

(Reporting by Akanksha Rana in Bengaluru and Tina Bellon in New York; Additional reporting by Noel Randewich in San Francisco; Editing by Saumyadeb Chakrabarty and Lisa Shumaker)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.