Surprise $342-million profit energizes oft-sputtering Tesla shares
Elon Musk’s repeated promises of profit have been met with widespread skepticism from investors and analysts, but on Wednesday, the Tesla Inc. CEO delivered.
When the Street was expecting Tesla to post another massive net loss — to the tune of $253 million — the electric carmaker surprised by posting a $342 million profit. The company’s stock, which has spent a majority of 2019 trending downward from its peak of US$379.49 in
January, instantly rose 20 per cent in after hours trading on Wednesday. Shares in Tesla closed higher at more than 17 per cent on Thursday.
Profits have been rare for the California-based company since its market debut in 2010. Previously, Tesla had only been profitable four times in its history as a publicly traded company, most recently in back-to-back quarters in 2018. Musk’s company also posted profits once in 2016 and for one other quarter in 2013.
Tesla reached profit in a less than conventional method. For the first time in five years, the electric carmaker did not increase year-overyear revenue, which came in at US$6.3 billion. That’s down from the previous quarter and US$520 million less than the third quarter of 2018. But with the company continuing its aggressive expansion into China, it managed to be more efficient and offset lower revenue with lower manufacturing and capital expenditures.
The company was able to break ground on its Gigafactory Shanghai
facility in January of this year and build it in 10 months. Musk described the factory as being a “template for future growth.” It cost 65 per cent less than Tesla’s Model 3 production line in the U.S. and could eventually help triple the company’s output, he said.
The surprise profit also gave Musk some vindication in his long-running battle with short sellers who had frequently targeted Tesla.
On Thursday, Tesla short sellers saw their year-to-date markto-market profits of US$2 billion erased and turn to US$1.36 billion losses, S3 Partners managing director of predictive analytics Ihor Dusaniwsky wrote in a note.