Elon Musk attends ‘Exploring the New Frontiers of Innovation: Mark Read in Conversation with Elon Musk’ session during the Cannes Lions International Festival Of Creativity 2024 – Day Three on June 19, 2024 in Cannes, France.
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Tesla shares soared 20% on Thursday, putting the stock on pace for its best day since 2013, following the company’s better-than-expected earnings report.
The company late Wednesday reported revenue of $25.18 billion, which came in just under analysts’ expectations of $25.37 billion, but was up 8% compared to a year earlier. Tesla reported earnings per share of 72 cents adjusted, topping the average analyst estimate of 58 cents.
“We expect this surprising earnings beat to power a strong positive reaction in Tesla shares Thursday, given the degree to which investors have become conditioned to earnings misses from the company,” analysts at JPMorgan wrote in a note.
Tesla’s profit margins in the third quarter were boosted by $739 million in revenue for environmental regulatory credits, which the JPMorgan analysts noted were a “potentially unsustainable driver” of earnings and cash flow.
Automakers are required to obtain a certain amount of regulatory credits every year, and if they can’t meet the target, they can buy credits from other companies. Tesla has excess credits because it only makes electric vehicles.
Tesla earnings also got a boost from FSD, the company’s Full Self-Driving Supervised system. CFO Vaibhav Taneja said on the earnings call that FSD contributed $326 million in revenue in the quarter after Tesla made it available for use in the Cybertruck and added a feature called “Actually Smart Summon.”
CEO Elon Musk said on the call that his “best guess” is that “vehicle growth” will reach 20% to 30% next year, citing “lower cost vehicles” and the “advent of autonomy.” Analysts surveyed by FactSet were expecting delivery growth of about 15% for 2025.
Analysts at Morgan Stanley who recommend buying the stock, called Musk’s 2025 vehicle delivery growth prediction a “maybe.” They set their estimate at 14%.
It “clearly depends on the company’s ability to improve affordability through cheaper model (next gen) introduction, financing offers and improved features,” the Morgan Stanley analysts wrote in a note on Thursday.
The rally on Thursday was second steepest on record and the sharpest since a 24% gain in May 2013. The jump erased Tesla’s loss for the year and left the stock up 3% in 2024, though it still trails the 22% gain for the Nasdaq.
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