Tesla (TSLA 307.79, +19.29, +6.69%) opened higher by 10% after reporting blow-out
third quarter results.
Pretty much everyone thought Elon Musk was crazy when he guided for profitability in the second half of the year, but he delivered just that last night.
The company reported Q3 GAAP net income of $312 mln, well above estimates for a ($169) mln net loss. Free cash flow was $881 mln supported by operating cash flow of $1.4 bln.
What's more, Tesla expects to be profitable and cash flow positive every quarter going forward.
Model 3 was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume. Tesla says it's attracting customers of both premium and non-premium brands, making it a truly mainstream product. Of the 455,000 net reservations the company reported in August 2017, less than 20% have cancelled.
On the call, Tesla said the Model 3 would be available in Europe by March and in the Asia Pacific region in the second quarter of next year.
Based on the demand the Model S has seen over the years, the Model 3 seems likely to have a long runway for growth.
Naysayers and shortsellers have been skeptical about the company's production, margins, demand, and less-than-stellar balance sheet, but it seems Elon Musk has proved all of them wrong.
The company has no plans to raise debt or equity capital after total cash increased by $731 mln to $3.0 bln.
It's hard to imagine that some of the short sellers will give up in the current market conditions. Many highly valued stocks have seen a sell-the-news reaction following strong reports in recent weeks. Still, it appears most of the short theses fell apart yesterday -- there are ~34 mln shares short the stock.
While the $53 bln valuation isn't necessarily cheap, one could make the case that the ~2x sales multiple for 2019 is attractive given the potential growth outlook.
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