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'Game Changing': Wall Street Weighs In On Tesla's Q3 Earnings

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'Game Changing': Wall Street Weighs In On Tesla's Q3 Earnings

Tesla Inc (NASDAQ: TSLA) shares rocketed higher by nearly 20% on Thursday after the company blew earnings expectations out of the water in the third quarter. Tesla’s big gain has it on track for its best day since 2013.

Investors cheered Tesla’s first profitable quarter since the fourth quarter of 2018, and the company reported impressive progress in getting its Shanghai factory up and running.

The company’s cash reserves grew, and auto margins increased despite revenue dropping 8%, its first year-over-year decline since 2012.

Tesla got some love from Wall Street, but several bears dug in their heels on the polarizing auto company. Here’s a sampling of what analysts had to say.

New Era?

Wedbush analyst Daniel Ives said Tesla delivered a potentially “game changing” quarter that could mark the beginning of a new era of profitability and cash flow.

“To this point, Tesla delivered a Picasso-like quarter last night with profitability and EBITDA approaching $900 million (Street was at $646 million) that speaks to a business model which has significantly lower costs, more production efficiency, and automotive gross margins approaching 23% which is extremely impressive on the heels of the lower margin Model 3 shift,” Ives wrote in a note.

Loup Ventures' Gene Munster said Tesla’s profitability is a reassurance that the company may finally be financially self-sustaining.

“The trend in profitability is a measurable and potentially sustainable positive that could change the long-term trajectory of the Tesla story,” Munster wrote.

Still Work To Do

Bank of America analyst John Murphy said positive cash flow and declining revenue makes Tesla nothing more than an expensive auto stock.

“We would point out that OEMs in our coverage typically trade at about 3x EV/EBITDA or about 10x P/E through cycle, which in isolation implies a theoretical stock price of $28 on our revised 2020 estimates,” Murphy wrote.

Credit Suisse analyst Dan Levy said Tesla’s quarter was certainly impressive, but the biggest question is whether or not it can be consistent.

“Our take – a strong step forward, yet Tesla will need to put together a string of similar data points to demonstrate the sustainability of results…and its track record has been spotty on this,” Levy wrote.

Ratings And Price Targets

  • Bank of America has an Underperform rating and $235 target.
  • Credit Suisse has an Underperform rating and $200 target.
  • Wedbush has a Neutral rating and $270 target.

Tesla's stock traded higher by 16.7% to $297.26 per share at time of publication.

Benzinga’s Take

There's very little to criticize about Tesla's third quarter. However, Tesla reported adjusted EPS of $1.93 in the fourth quarter of 2018 only to fall back into the red in the two quarters that followed. To truly silence the Wall Street critics, Tesla will need to prove it can be consistent and predictable.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

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Tesla Is By Far The Most Profitable Short Trade Of 2019

Latest Ratings for TSLA

DateFirmActionFromTo
Dec 2019MaintainsBuy
Dec 2019MaintainsEqual-Weight
Dec 2019MaintainsSell

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

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