Tesla Stock Price Gains After Strong Q3 Profits

Despite challenges from logistics and SEC investigations, Tesla still posts strong Q3 profits.


Surprisingly, Tesla has posted profits in Q3 2018. Despite a quarter shrouded in PR nightmares, Tesla has managed to drive the Model 3 gross margin to 20%. The success of the Model 3 has ensured that Tesla’s profitability for the last quarter.

Before Tesla’s official earnings webcast, the automotive company announced to shareholders that it would be turning over a sizable profit for Q3. In the letter from Tesla, the company profits for Q3 are $312 million. The news of a strong Q3 caused Tesla stock price jump significantly.

Tesla’s Q3 was not as smooth as investors would have liked. The problems that Tesla faced focused around Tesla’s Model 3 production rate, high scrap rates and delivery issues. More importantly, Tesla and Elon Musk faces investigation from the SEC relating to a tweet from Elon Musk. Despite all of these challenges, Tesla still posted a Q3 profit.

Tesla Stock Price Analysis

In Q3, Tesla delivered a staggering 56,065 Model 3’s and 27,710 other models. The company’s solar business is also making gains, with it gaining 7% in Q3 and 26% year over year.

Tesla has also increased its cash (including equivalent) reserves by $731 million, bringing reserves to $3.5 billion. This should entice investors to see Tesla stock as a long-term position as its volatility seems to be decreasing.

With this increased cash pile, Tesla may be looking to invest that cash into its first Gigafactory overseas. The first overseas Gigafactory will be in Shanghai, China, which is capable of producing 250,000 vehicles per year. To build this new Shanghai factory Tesla is looking to spend around $2 billion in overall costs.

Tesla’s total revenue more than doubled, reaching the $6.82 billion level. This crushed the analyst average estimate of $6.33 billion.

The strong Q3 profits have pushed the Tesla stock price over the $300 level.

Tesla spend $510.3 million in Q3 capital expenses.

To summarize, Tesla turned a profit of $311.5 million, which equates to $1.75 per share. Compared to 2017, Tesla reported a loss of $619.4 million, which is $3.70 per share.

Revenue$2.9 billion$6.8 billion
Profits$311.5 million-$619.4 million
Earnings Per Share$3.70$1.75

Tesla Stock Prediction

Our price target for Tesla stock is $350.

Our analysts give Tesla stock a “BUY” rating right now.

  • Morgan Stanley (BUY) are giving Tesla stock a BUY rating, this is their take. “The quality of cash flow was stronger than expected with working capital not benefiting as much as we had anticipating.”
  • Goldman Sachs (SELL) statement with Tesla is this: “We question if this is not as good as it gets from a near-term upside surprise for shares. The company has maintained that it designed and built the Model 3 with a target 25% gross margin and almost achieved that this quarter (albeit with a rich mix). However, with its own exposure to China tariffs on imported components and likely headwinds to mix as lower price point vehicles are offered, automotive gross margins likely compress sequentially into 4Q18 – and could see further mix pressure into 2019 as the US Federal Tax Credit begins to phase out for its vehicles.”
  • JPMorgan (SELL) despite a sell rating from JPMorgan, Tesla’s price target has increased to $225. This is what JPMorgan said “We remain Underweight, both on valuation and concern the new stronger trajectory to earnings and cash may prove less sustainable than the market is likely to presume, including given several headwinds.”

AMD stock earnings also gain due to Q3 results.