ii view: Tesla stock rockets on bullish 2025 outlook

Third-quarter results to 30 September

• Total revenue up 8% $25.18 billion
• Auto revenue up 2% to $20 billion
• Energy generation and storage revenue up 52% to $2.38 billion
• Services and other revenue up 29% to $2.8 billion
• Adjusted earnings per share up 9% to $0.72
• Cash and investments held up 29% to $33.6 billion

ii round-up:

Tesla Inc (NASDAQ:TSLA) has detailed earnings comfortably ahead of Wall Street expectations, with the electric vehicle (EV) maker presenting an optimistic demand forecast for 2025. 

Lower cost production, cheaper vehicle prices, self-driving cars, and ride hailing all potentially feed into Tesla’s estimate for vehicle delivery growth of between 20% and 30% next year. Analyst had forecast just 15%. Third-quarter adjusted earnings are up 9% year-over-year to $0.72, surpassing consensus estimates of $0.60 per share. 

Shares in the Nasdaq 100 company soared 12% in after-hours US trading having come into this latest news down 14% year-to-date. That’s similar to German car giants Volkswagen AG (XETRA:VOW) and Porsche Automobil Holding SE Vorz-Inhaber-Akt stimmrechtslos (XETRA:PAH3). Smaller US EV maker Rivian Automotive Inc Class A (NASDAQ:RIVN) and luxury producer Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML) have about halved in 2024, while the Nasdaq 100 index is up 21%.   

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Aided by demand for the Cybertruck, Tesla’s auto related quarterly revenue rose 2% year-over-year to $20 billion. More efficient production techniques are expected to assist with the launch of new cheaper future vehicle models including a recently unveiled Robotaxi.

Energy generation and storage related sales soared 52% to $2.38 billion. Tesla provides either roof solar tiles or more traditional solar panels which can be linked to its home storage batteries, enabling a property to potentially become electricity self-sufficient. 

Services and other revenue, including fees from its expanding charge network and out-of-warranty cars, climbed 29% from a year ago to $2.8 billion. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, with a fair value price of $310 per share.  

ii view:

US headquartered Tesla only makes electric powered vehicles. The Elon Musk headed company produces cars from two plants in the US, along with one in China and one in Germany. It previously flagged hopes to build a factory in lower cost Mexico. Geographically, the US dominants with close to half of all sales, with China accounting for just over a fifth and other markets including the UK making up the balance. 

For investors, competitors such as General Motors Co (NYSE:GM), Mercedes-Benz Group AG (XETRA:MBG), Renault SA (EURONEXT:RNO) and Ford Motor Co (NYSE:F) are all now actively pushing their own EV models. Group capital expenditure increased 43% year-over-year to $3.51 billion with investment in self-driving software, AI, and even potential products such as robots and drones likely ongoing. Borrowing costs to finance a vehicle purchase remain elevated, while a projected price-to-net asset value (NAV) of around 11 times compares to estimates for rivals at under two times, suggesting the shares are not obviously cheap.

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To the upside, climate change concerns are not going away. Innovative products such as self-driving software and a Robotaxi could potentially generate significant profits in the future. Innovative manufacturing techniques including casting one major bodywork item instead of welding together many are aimed at reducing costs, while growing sales at its solar and energy storage systems should not be ignored.

In all, huge innovation to date and market leading positions such as that for EVs in its home US market, offer considerable hope. That said, the slow generation of profits from other innovative projects such as the Robotaxi, plus risk of missing aggressive growth targets at its main EV business, do provide room for caution.

Positives: 

• Climate change concerns persist
• Expanding network of superfast charging stations

Negatives:

• Rising competition from other manufacturers
• Potential regulatory hurdles for self-driving vehicles

The average rating of stock market analysts:

Strong hold