Tesla Inc.’s stock is going through the roof after the company reported bigger-than-expected profits and gave investors a lot of good news. But investors still have some questions.
Tesla TSLA 0.80% reported results for the third quarter on Wednesday. They then held a call with investors where CEO Elon Musk was very positive.
The stock then went up by almost 22% on Thursday, and it went up another 3.4% on Friday. This was the best two-day stretch for shares since the two days ending on February 4, 2020, when they went up 36%.
The stock had its best day since September 15, 2023, when it finished at $274.39, on Friday at $269.23.
One reason for the optimism was that Tesla’s car gross margins, minus regulatory credits, were high. That was one of the most important numbers going into the report, and it didn’t disappoint: it jumped from 14.6% last quarter to 17.1%, beating the expectation of about 15% among analysts.
When you look more closely, though, the number doesn’t seem as amazing.
In a letter to shareholders that went with the results, Tesla explained that the quarter was helped by $326 million in “catch-up” income from “Full Self-Driving revenue for Cybertruck and certain features” from FSD updates.
Tesla’s FSD is a group of advanced driver assistance devices for city driving.
A note from Tom Narayan at RBC Capital Markets on Friday said that car gross margins ex-credits would have been about 15.6% without that boost. He added that this would have still been “comfortably” better than expected.
Narayan said that much of the progress that led to the beat is likely to continue in this quarter. However, the margins are likely to be lower than they were in the previous quarter because of price cuts and deals like 0% loans in the U.S. and China.
Investors were also happy to hear that Tesla was still on track to release a cheaper EV in the first half of next year. This EV is expected to cost less than $30,000.
Gene Munster of Deepwater Asset Management said in a note Friday, “Given the short time frame, this probably won’t be a whole new model. Instead, it will be a lower-end version of a current model with some small changes.”
Still, Narayan of RBC said that the amount of cheering was “head scratching.”
“Tesla has been saying similar things for three quarters in a row,” he said. Many people think that the company isn’t giving out too many information on purpose to avoid the “Osborne effect,” which makes people less likely to buy current models and more likely to wait for a newer one.
And then there was Tesla’s energy business, which also got a good report from the top.
The company that makes EVs thinks that its energy-storage sales will more than double this year compared to last. It also plans to begin making things at its plant in Shanghai in the first quarter of 2019.
John Murphy of BofA Securities said in a recent note that the number of energy storage projects in the works keeps growing.
Tesla’s business that makes and stores energy made about $2.4 billion in the third quarter, up from about $1.4 billion in the third quarter of 2023. Also, the company had a profit margin of 30.5%, up from 24.6% in the second quarter.
With the latest gains, Tesla’s stock is now in the black for 2024. It is up 8%, while the S&P 500 index SPX 0.36% is up 22%.
