Investors applauded beats on adjusted earnings per share and higher gross margins in addition to the news that Tesla’s cheaper electric vehicle is on track for production next year. CEO Elon Musk also said in the earnings call that Tesla’s volume growth could be 20-30% next year.
Adjusted earnings per share came in at 72 cents, outpacing the Zacks Consensus Estimate of 58 cents and improving from the year-ago earnings of 66 cents. Revenues increased 8% year over year to $25.18 billion but were below the Zacks Consensus Estimate of $25.57 billion.
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Cybertruck production increased sequentially in Q3 and achieved a positive gross margin for the first time,” Tesla said in its report. Tesla management said, “preparations remain underway for [the] offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Is the TSLA Stock Boost Sustainable?
Earlier this month, Tesla returned to delivery growth in the third quarter after two successive quarters of decline and reported the third-largest quarterly number in the company’s history. The return to growth shows that some of the incentives that Tesla had rolled out to boost demand are now paying off.
Still, we would like to note that Tesla’s delivery numbers fell short of estimates in the past. Tesla has been losing market share to rivals in both China and the United States, resulting in a notable slowdown in growth. This month itself we have seen Tesla’s unimpressive robotaxi event, which failed to meet expectations, raising concerns among ridesharing investors.
On Oct. 10, 2024, Tesla introduced its CyberCab, an autonomous vehicle designed for ridesharing, along with a 20-seater “RoboVan.” Tesla CEO Elon Musk envisioned operating fleets of these vehicles as an alternative to Uber and Lyft. Despite this, analysts were underwhelmed by the lack of exact details regarding Tesla’s plans to launch a ridesharing platform (read: Time for Uber-Lyft ETFs After Tesla’s Unimpressive Robotaxi Event?).
On the conference call, Tesla chief Musk said the Cybercab would reach volume production in 2026, and the company aims for 2 million Tesla Cybercabs per year. Still, JPMorgan believes Tesla’s share pop is ”unsustainable,” as quoted on CNBC. Note that Tesla had a tough first half of the year that saw Tesla cut more than 10% of headcount.
Tesla Stock Performance & Valuation
Tesla stock is up 3% so far this year and has gained 0.6% past month. The Tesla stock is pricey too. TSLA stock trades at a price-to-earnings (trailing 12 month) ratio of 91.30X versus the underlying Automotive – Domestic industry measure of 10.90X. Price-to-book (most recent quarter) ratio of Tesla stock is 10.16X versus the industry measure of 0.97X.
Tesla Growth Projection
Tesla’s next year’s expected growth rate is 34.2% versus the industry’s expected growth rate of 25.90%. The company’s expected growth rate is 19.90% for the next five years versus 15.60% expected for the underlying industry. Having said this, cautious investors may want to take a wait-and-see approach until Tesla can offer early signs of at least 20% vehicle growth next year.
Tesla ETFs in Focus
Until then, bullish investors can tap exchange-traded funds (ETFs) having with a substantial allocation to this luxury carmaker Tesla. The ETF approach minimizes the company-specific concentration risks. These ETFs include ARK Innovation ETF (ARKK – Free Report) , Consumer Discretionary Select Sector SPDR Fund (XLY – Free Report) , Simplify Volt Robocar Disruption and Tech ETF (VCAR – Free Report) and ARK Autonomous Technology & Robotics ETF (ARKQ – Free Report) .
