Tesla is back on track after a rocky start to the year.
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The electric-car maker posted a surprise profit and record deliveries during the third quarter, sending shares surging on Thursday. The gains had Tesla's stock on track for its biggest one-day advance since May 9, 2013, according to Dow Jones Market Data.
“Last night, Tesla delivered a potentially ‘game-changing’ third quarter with surprise profitability and strong cash flow signaling what could be a new era for Musk,” Wedbush analyst Dan Ives said in a note to clients.
“While strong Model 3 deliveries were known and appear to be showing strength into the fourth quarter on the heels of healthy Europe and U.S. demand, the white-knuckle unknown variable from the street was around the bottom line, as Tesla prior to last night had struggled to get out of the red ink."
Tesla earned $143 million, or 78 cents a share, in the third quarter as revenue fell 8 percent from a year ago to $6.3 billion. On an adjusted basis, Tesla earned $1.91 a share, easily beating the 42-cent loss that Wall Street expected. The company lost $2 billion last year, and lost money in both the first and second quarter of this year.
The automaker delivered a record 97,000 vehicles during the quarter and said that it’s “highly confident” it'll exceed its target of 360,000 for the year.
CEO Elon Musk said trial production has begun at its Shanghai Gigafactory, and the company will soon announce its plans for one in Europe.
“I'm not aware of any factory of this magnitude in history being constructed in such a short period of time, approximately 10 months,” Musk said on the earnings call. “As far as I know, this is unprecedented. And Gigafactory Shanghai will become a template for future growth.”
Ives called the quarter “Picasso-like” and said it was an “inflection point,” attributing the surge in Tesla’s stock price to historic short-covering.
Short interest, or the number of borrowed shares sold with the hope of buying them back at a profit, was $8.31 billion, or 32.62 million shares, according to the financial analytics firm S3 Partners. Thursday’s surging stock inflicted a loss of at least $1.4 billion on those betting against the stock, S3 said.
The losses are likely to bring a smile to the face of Musk, who has previously expressed his loathing of investors who bet against Tesla.
“These guys want us to die so bad they can taste it,” Musk tweeted in June 2018.
In Ives' mind, the short-sellers could be in for more pain in the months ahead. He raised his price target from $220 to $270 a share – nearly 22 percent higher.
“While we are still taking a wait-and-see approach to see how sustainable this level of demand/profitability is going forward, this morning we move one step closer to believing this Tesla turnaround story is real, with Musk delivering a robust performance with his back against the wall,” Ives concluded.