In a surprising turn of events, Tesla shares experienced a remarkable 8% jump in after-hours trading following the release of the company’s third quarter earnings report on Wednesday. The electric vehicle titan managed to exceed Wall Street’s expectations for earnings per share, posting $0.72 compared to the projected $0.60. This impressive performance comes as a much-needed boost after two consecutive quarters of sluggish results.
Bouncing Back from a Challenging Q2
Tesla’s CEO, Elon Musk, had previously attributed the company’s nearly 50% drop in profits during the second quarter to fierce competition from rivals like BYD, who had slashed prices on their electric vehicles. At the time, Musk assured investors that this was a temporary setback, stating, “We don’t see this as a long-term issue, but really fairly short term.”
Slight Revenue Miss Amid Positive Outlook
Despite the impressive earnings beat, Tesla fell slightly short of expected revenue, reporting $25.18 billion compared to Wall Street’s projection of $25.43 billion. Nevertheless, the company remains optimistic about its future prospects. In a press release, Tesla stated:
“Despite sustained macroeconomic headwinds and others pulling back on EV investments, we remain focused on expanding our vehicle and energy product lineup, reducing costs and making critical investments in AI projects and production capacity. We believe these efforts will allow us to capitalize on the ongoing transition in the transportation and energy sectors.”
Vehicle Deliveries on the Rise
Tesla delivered an impressive 462,890 vehicles in Q3, a notable increase from the 443,956 delivered in the previous quarter. Investors are eagerly awaiting further details on whether the company is on track to match its 2023 vehicle delivery target of 1.8 million. According to Tesla, slight growth in vehicle deliveries is expected by the end of the year.
Dan Ives, an analyst at Wedbush Securities, remains confident in Tesla’s ability to meet this goal, stating that it would be “a solid feat given the extensive white-knuckle moments seen throughout the first half of the year.”
Robotaxi Launch Falls Flat
Investors are also seeking more information about Tesla’s robotaxi project following a disappointing launch event earlier this month. The unveiling of the much-hyped self-driving vehicle provided scant details, causing Tesla shares to drop by nearly 9% and erasing more than $60 billion from the company’s value.
Tom Narayan, an analyst at the Royal Bank of Canada, criticized the event, noting that it focused more on branding and marketing Musk’s vision “rather than giving concrete numbers for us to model out” as is typically expected at such launches.
Musk’s Political Activism Raises Concerns
Elon Musk’s recent foray into politics has also raised eyebrows among investors. In addition to founding the America Pac and campaigning for Donald Trump, Musk has initiated a $1 million daily sweepstakes for swing state voters who sign his petition. The legality of this giveaway has come under scrutiny, with Pennsylvania Governor Josh Shapiro calling for law enforcement to investigate Musk and the practice.
Musk’s political activism appears to be impacting consumer sentiment towards Tesla. According to a survey conducted by car buying website Edmunds, 31% of shoppers said they are less likely to purchase a Tesla because of Musk, while 37% are waiting for the election results before deciding whether to buy a Tesla. Among Democratic women surveyed, 44% indicated they are less likely to buy a Tesla due to Musk’s actions.
Market Share Growth Amid Legal Scrutiny
Despite the controversy surrounding Musk, Tesla has managed to capture a larger share of the electric vehicle market. The company’s market share hit an all-time high of 8.3% in Q3, up from 7.5% in the same quarter of 2023.
However, Musk is facing legal scrutiny on multiple fronts. The European Union is considering fining X, the parent company of several Musk-owned ventures, based on the total sales of SpaceX, Neuralink, xAI, and the Boring Company. The bloc alleges that X failed to address illegal content and disinformation on its platform. Fines could amount to as much as 6% of the combined yearly revenue of these companies.
As Tesla navigates these challenges and opportunities, investors will be closely monitoring the company’s performance and Musk’s actions in the coming months. While Q3 earnings have provided a much-needed boost, the long-term impact of Musk’s political activism and the success of Tesla’s robotaxi project remain to be seen.
