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Tesla’s third quarter positive earnings undoes much of Musk’s damage to stock

27 October, 2018, 20:53 | Author: Shawna Walton
  • Tesla approves Model Y for production

Tesla reaffirmed its forecast for profit and positive free cash flow in the fourth quarter, adding credibility to Musk's prediction a quarter ago that the company will make those feats routine going forward.

The production issues Tesla has experienced since launching the Model 3 sedan in July 2017 have also been attributed to excessive automation at its factory in Fremont, California, where it assembles its vehicles.

Tesla, for its part, said that it has not received a subpoena from the Department of Justice and that it complied with a voluntary request for documents from law enforcement in mid-September.

Musk meanwhile will be replaced as Tesla's chairman imminently after a ruling from the SEC that also saw the South African-born entrepreneur hit with a fine of $20 million (£15.6 million).

Musk later abandoned his plan and the Securities and Exchange Commission subsequently filed a lawsuit alleging that he had misled investors because he was never close to lining up the estimated $25 billion to $50 billion that it would have taken to pull of the deal he envisioned.

Oracle Corp. founder Larry Ellison is a big believer in Tesla Inc. and defender of his friend Elon Musk.

But it hasn't been previously reported that the Justice Department is focusing on Tesla's Model Three production issues dating to early past year and that the criminal securities-fraud probe is intensifying.

The electric-car company originally offered this version of its entry-level sedan with the option of a "performance upgrade" package, priced at $5,000.

We believe this is mostly working capital driven; and with the company's growth targets, capital requirements, an expected slow improvement in gross margin trajectory, and our views on sustainability of demand (particularly when incentives dissipate) we still see downside risk to longer-term FactSet consensus estimates. "Model 3 was the best-selling vehicle in the U.S. in terms of revenue and the 5th best-selling auto in terms of volume". This is only the third time in the company's eight-year history as a public company that it has posted a quarterly profit.

The company earned $311.5 million during the three months ending in September, swinging from a loss of $619 million at the same time past year. As for cash flow, Tesla came out smelling like a rose. The best outcome for Tesla was not just being able to turn a profit in the 3rd quarter, but the company has stopped burning through its cash. That ramp-up is now largely over, so Tesla is generating cash, not consuming it. When free cash flow is negative, a company needs a source of outside capital-either taking out loans or selling shares-to finance continued spending.

According to CNBC, Musk told investors that the Model 3 is accruing orders of "anywhere from 500,000 to 1 million cars a year".

Strong third quarter across the board helped by Model 3 mix.


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