Tesla Shares Jump After Q3 Earnings Beat, 2020 Delivery Target

Tesla held to its 2020 target of 500,000 deliveries, and suggested next year's total could be closer to 1 million as factories in China and the United States continue to expand production.
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Tesla Inc.  (TSLA) - Get Report shares bumped higher Thursday after the clean-energy carmaker stuck to its full-year delivery forecast, and hinted at even stronger numbers in 2021, following stronger-than-expected third quarter earnings after the close of trading yesterday.

Tesla said non-GAAP earnings for the three months ending in September were pegged at 76 cents per share, more than double last year's tally and well ahead of the Street consensus forecast of 37 cents per share. Group revenues surged 38% to $8.771 billion, Tesla said, as delivery volumes for the quarter hit a record 139,300 units.

That pace, Tesla said, should increase even further over the final months of the year as the group held to its 2020 forecast of 500,000 deliveries, a figure that suggests the fourth quarter total would need to rise past 180,000.

Founder and CEO Elon Musk also told one analyst on the earnings call last night night he was 'not far off' in suggesting that next year's delivery total could come in between 840,000 and 1 million units. 

"We are increasing production to meet demand, reducing costs, including localization, driving higher efficiency across the business and tightening our cash conversion cycle," said CFO Zachary Kirkhorn. "We've made tremendous progress on this front over the last 1.5 years. We're also aiming to achieve our original 2020 guidance of 500,000 deliveries despite the operational interruptions earlier in the year."

"While this goal remains a genuine challenge, we believe it's possible with tight execution across the company," he added.

Tesla shares were marked 4% higher in early trading Thursday to change hands at $438.72 each, a move that still leaves the stock down some 11% since its five-for-one split on August 31. 

"In terms of the stock, we have tried to keep our eye on the horizon as opposed to being influenced by quarter-to-quarter developments," said JMP Securities analyst Joseph Osha, who lifted his rating on the stock to 'outperform' with a $516 price target. "Even though commentary yesterday caused us to raise our outlook for 2021, it does not by itself give us cause to change our stance on the stock."

"That said, we do believe the outlook for margins and for cash flow generation over the next several years appears to be higher than we thought. This impacts not only our financial model, but also the level of risk we assign to our 2025 outcome and the multiple we apply," he added. "In our view, this is enough of a premium to merit returning to a Market Outperform rating."