Tesla (TSLA) reported third-quarter earnings that beat analyst expectations, with adjusted earnings per share of 0.72 cents, beating analyst expectations of 0.58 cents. Despite revenue slightly falling short of expectations at $25.18 billion, compared to the expected $25.37 billion, the company’s shares rose about 20% on Thursday. Although the stock is priced at a premium, the company has allayed profitability concerns through its third-quarter financials and estimates of 20%-30% growth in auto sales next year, prompting renewed belief in TSLA stocks and posted my bullish stance on TSLA. stock on the way.

Tesla’s Q3 performance

As mentioned above, one of the main reasons for my bullish sentiment on TSLA stock is its latest earnings report, which showed its strength in the EV market. The electric vehicle maker’s revenue rose 8% from the $23.35 billion reported in the same quarter last year. Net income also rose from $1.85 billion, or 0.53 cents per share, to about $2.17 billion, or 0.62 cents per share.

Tesla’s profit margins benefited from $739 million in regulatory credit revenue from the automotive sector, which comes from selling excess credits to other automakers that don’t meet regulatory targets. A margin gain is likely one of the biggest reasons why Tesla stock had a huge post-earnings rally.

“This is a clear indication that Tesla CEO Elon Musk and company remain focused on profitability while balancing their plans for the future,” Wedbush analysts claimed in their note to clients.

Tesla’s third-quarter vehicle deliveries totaled 462,890, up 6% from last year but below analyst expectations. The company produced 469,796 electric vehicles as of September 30. Despite previous quarters showing year-over-year declines, Tesla is optimistic about modest growth in car deliveries in 2024 and plans to launch more affordable models in the first half of 2025.

Bullish comments from Elon

Another reason Tesla shares rose is that CEO Elon Musk provided earnings insight on the company’s prospects, predicting auto growth of 20% to 30% next year, driven by cheaper vehicles and autonomous developments.

This forecast exceeds analysts’ expectations of a 15% increase and 2.04 million deliveries. Musk also highlighted that Tesla aims to introduce driverless self-driving services in Texas and possibly California as early as 2025, and mentioned the use of an app to offer rides to employees in the Bay Area.

Additionally, Tesla’s Cybertruck has become the third best-selling all-electric vehicle in the US, despite sales figures not being broken down by model. The company achieved a positive gross margin on the Cybertruck for the first time and sold more than 16,000 units in the third quarter.

What analysts say

According to TipRanks’ collection of analyst ratings and price targets, Tesla stock has a strong ‘Hold’ rating. The 12-month forecast implies a decline of almost 20% from current levels. The highest price target on Wall Street is $310 per share, the lowest is $24.86 and the average price target is $207.83.

See more TSLA analyst ratings

With Tesla being one of the hottest stocks on the Street, several sell-side analysts offered their analysis of the latest earnings report and management commentary. “It’s hard to be anything other than optimistic after today’s call,” noted Piper Sandler’s analyst Alexander Potter, a five-star analyst by Tipranks ratings.

Piper Sandler reiterated its Overweight rating on Tesla and maintained a $310.00 price target on shares of the electric vehicle maker. Potter was particularly curious about the significant quarter-on-quarter increase in gross margin.

Similarly, Deutsche Bank analysts also maintained a Buy rating and a $295.00 price target on the EV stock. Analysts noted that the guidance offered is likely to allay concerns about the company’s growth trajectory through 2025.

Should you buy TSLA at a premium?

After the call commentary, I think there are many reasons to remain positive on Tesla stock. Tesla reaffirmed its commitment to deliver a vehicle priced below $30,000 by early 2025. Elon Musk, the CEO, has described every vehicle the company produces as a “robotaxi.” This futuristic/FSD view is a key factor in the premium currently placed on Tesla’s market valuation, which trades at 95 times expected 2025 earnings per share (EPS).

On the other hand, skepticism is also increasing after the recent ‘We, Robot Day’ event. There are doubts that Tesla’s robotaxi service promise will materialize beyond 2030. The lack of detailed information about the project has led to caution among stakeholders. Analysts have pointed out that the ambitious robotaxi initiative is likely to face a lengthy and uncertain regulatory approval process. This could potentially delay the project’s completion well beyond Tesla’s original early 2025 target.

Additionally, reports from the event have indicated that the robots on display were operated via teleoperation rather than being fully autonomous. This heightens concerns about the near-term viability of Tesla’s robotaxi service and raises questions about the current state of the technology. Many investors see Tesla as a technology/AI/ML company and not just a car company; That’s why they’re willing to pay a premium to own futuristic stocks.

Conclusion

Tesla’s third-quarter earnings far exceeded expectations and ultimately fueled a 20% rally in this EV stock. Vehicle deliveries rose 6% year over year, while gross margins exceeded analyst expectations. More importantly, Elon Musk predicted auto growth of 20 to 30 percent by 2025, driven by cheaper models and improvements in autonomy. Most analysts remain optimistic, although concerns about Tesla’s ambitious robotaxi timeline remain. In my view, Tesla shares are likely to remain supportive in the near term as concerns about the company’s growth prospects for the coming year subside.

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