The News
Tesla’s third quarter earnings beat estimates and its Cybertruck reached profitability for the first time, the company said Wednesday.
However, the electric carmaker’s revenue slightly missed forecasts, increasing 8% year-on-year to hit $25.18 billion, slightly shy of the $25.37 billion analysts expected on average.
The electric vehicle giant’s profit margin was bolstered by $739 million in automotive regulatory credits for the quarter. While its car sales have risen, much of the growth is perhaps attributable to price cuts and other incentives, CNBC noted. By contrast, its energy generation and storage business brought in a record $2.38 billion for the company, according to the earnings report.
Together, the results were enough to boost investor confidence: Tesla’s stock price spiked 6% shortly after the market closed Wednesday and continued rising after trading hours, while the value of other EV makers’ stock also rose.
Looking ahead, Tesla said that new, more affordable models “remain on track” for production starting in the first half of 2025.
Investors have repeatedly expressed concern that Tesla is in danger of losing some of its market share to other electric vehicle companies that offer cheaper models.
SIGNALS
Wall Street could pull Musk ‘back toward Earth’
Elon Musk’s personal wealth is directly tied to Tesla’s performance as a company, which gives it an outsized influence over what some analysts call the “Muskonomy” — the network of businesses and ventures owned in whole or part by the billionaire. Beyond capital, the “data, infrastructure built and path to monetization within Tesla is critical to Musk’s seemingly ‘adjacent’ AI efforts,” Morgan Stanley analysts wrote in a May note. However, Musk tends to make “lavish business promises” that are difficult to fulfill, Politico noted, such as the recently revealed robotaxi, which underwhelmed investors and led to a loss of $68 billion in value overnight. Perhaps, Politico wrote, Wall Street “is still at least one force that can pull the tycoon back toward Earth.”
Tesla’s luxury brand status could be at risk
Musk has touted Tesla’s AI-powered software as a step above other EV makers’, but while impressive, the cars’ self-driving features have so far failed to live up to the billionaire’s longstanding promise that a Tesla could operate entirely autonomously. By contrast, investors are increasingly focused on Tesla’s core auto business, Business Insider reported. If vehicle sales fall below expectations for the year, Tesla may need to try “aggressive finance promos globally,” a Wells Fargo analyst wrote, which could lead to price wars with other EV makers, particularly (far cheaper) Chinese ones. That could put Tesla’s luxury reputation at risk, a Bloomberg Intelligence analyst said, adding that the company should instead work on a new, lower-cost model.
Despite hiccups, Tesla’s Cybertruck is so far a success
One piece of good news for investors is the success of Tesla’s Cybertruck, a vehicle that has been frequently mocked for its controversial design, expensive production, and software and hardware glitches. But Tesla sold nearly 16,700 Cybertrucks in the US this latest quarter, according to Barron’s. The vehicle now accounts for nearly 50% of the national market share for electric pickup trucks, and is profitable, the latest earnings report showed. That’s an “impressive start” given it has only been in the market for one year, Barron’s wrote, but Tesla needs to make a different, cheaper model to boost its overall sales significantly, the outlet argued.