This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Tesla released its third quarter (Q3) earnings report a week ahead of schedule. The carmaker reported a better-than-expected revenue, driving Tesla stock up 12%.
Tesla’s success story
The company earned a revenue of $6.82 billion, more than the expected $6.33 billion. Tesla also reported $881 million in free cash flow. This is the third time the corporation has turned a profit since Tesla’s initial public offering (IPO) went public in 2010.
Tesla's Q3 earnings increased after improved sales of its Model 3 sedan. The carmaker noted in terms of revenue that the vehicle was the best-selling car in the US and fifth best-selling by volume.
Elon Musk’s tweet trouble
Even though Tesla had a positive earnings report, the company’s founder, Elon Musk, has made more news recently for his online antics than for his electric cars. The carmaker’s chief executive officer (CEO) encountered controversy when he tweeted in August about securing private funding for Tesla. The US Securities Exchange Commission (SEC) sued Musk and accused him of trying to manipulate the stock price of the corporation. The company’s CEO and Tesla paid a combined $40 million fine. The SEC also forced him to step down as chair of the corporation for three years. Investors have urged Musk to stop tweeting, since shares of Tesla fell 7% after Musk insulted the SEC in a tweet.
Vindication for Musk and looking forward to Q4
The growth of Tesla’s revenue provides relief to Musk and gives a rebuke to investors who were short selling the carmaker’s stock. The embattled entrepreneur and company thanked their supporters for remaining with the company during the corporation's turbulent ride on the US stock market.
‘Sufficient Model 3 profitability was critical to make our business sustainable – something many argued would be impossible to achieve,’ noted Tesla in a statement to stockholders. ‘We can’t thank you enough for your support. We would not have achieved this historic quarter without it.’
The company expects to have flat or positive cash flow in Q4.
‘Our cash position should remain at least flat in spite of our plan to repay $230 million of convertible notes in cash during Q4,’ said Tesla.
The carmaker is also ramping up production of its more affordable Model 3 car by buying a factory in China.