Tesla’s Stock Soars Following Strong Q3 Margins
Tesla’s shares soared by 7% in electronic trading after the release of its Q3 earnings report on October 23, 2024. Despite failing to meet the consensus revenue estimate of $25.5 billion, the EV manufacturer met or surpassed Wall Street’s EPS expectation of $0.72 with $25.2 billion.
The surge in Tesla’s stock can largely be attributed to its significant margin growth. Gross margins climbed to 19.8%, driven by a record low cost per vehicle, with Tesla reporting that its cost of goods sold (COGS) per car had decreased to around $35,100. This helped ease investor concerns after Tesla’s previous quarters saw margin compression, as it ramped up production and slashed vehicle prices to remain competitive.
Tesla’s ability to balance pricing with cost-cutting measures, along with offering incentives like 0% APR loans, has been key to its improved profitability this quarter.
Another rather surprising component of its earnings release was Tesla’s further expansion in regulatory credit sales as well as a margin gain. The overall strong regulatory credit sales from the company also supported its financial strength, even though the delivery rates remain below expectations, especially for its high-end S & X models. Tesla reported that it had delivered slightly below the projected about 4630000 in the third quarter of the year.
Tesla’s CEO Elon Musk also sought to reassure its investors on the company’s fundamental upbeat Q3 earnings call where he provided an outlook on the carmaker’s sustainable growth plan. He only drew more attention to cutting down the cost of production even more and added to that the prospects of making even more cost-effective models. Musk pointed out that the Model 2, an electric vehicle Tesla has planned, will still hit the production line in 2025.
Moving to the forecast, Tesla has painted a rosy picture of its margins for the next year preparing for a good Q4, especially with the much anticipated Cybertruck. Tesla is forecasting more deliveries in the last quarter and believes that the energy storage segment will have an increased contribution towards Tesla revenues going forward.
While Tesla has failed in some aspects to hit a $2 billion revenue, the margin has given investors the confidence they need again. Most commentators see this as Tesla’s inflection point –its capacity to adapt to adversity and remain profitable while setting up future progress in the intensely competitive EV segment.
