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Tesla Stock Higher After Record Q3 Earnings; Cautious Margin Outlook

Tesla CFO Zach Kirkhorn noted that ramping up production in Texas and Berlin will "partially weigh on profit margins" after the group reported record third quarter earnings and revenues.

Tesla  (TSLA) - Get Tesla Inc Report shares moved higher Thursday after the clean-energy carmaker posted record third quarter profits but cautioned that ramping-up production at new plants in Texas and Germany would pressure profit margins over the final months of the year.

The cautious outlook somewhat clouded last night's blowout earnings, which included record net income of $2.093 billion, revenues of $13.76 billion and a 30.5% profit margin over the three months ending in September.

Tesla said non-GAAP earnings were pegged at $1.86 per share, up 135% from the same period last year and well ahead of the Street consensus forecast of $1.59 per share.

"There is quite an execution journey ahead of us," CFO Zach Kirkhorn told investors on a conference call late Wednesday. "We've talked about this a bit, you know, the unknown unknowns, new factories, new vehicle designs, new technologies, new locations, new teams ... (but) ... it remains our target in both Austin and Berlin to be able to build our first production cars before the end of the year."

"It's important to stress, while the first production car is an important milestone, the hardest work lies ahead in the ramp. Please keep in mind that we are pushing the boundaries on new product and manufacturing technologies at these factories, which makes it difficult to predict the exact pace of the ramp," Kirkhorn noted. "These factories will also partially weigh on our margins as we work toward volume production."

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Tesla shares were marked 2.5% higher in early trading Thursday to change hands at $887.08 each.

Tesla noted in its earnings release that 'a variety of challenges, including semiconductor shortages, congestion at ports and rolling blackouts, have been impacting our ability to keep factories running at full speed," although the group still managed to deliver a record 241,300 new cars over the three months ended in October, up 73.2% from last year and nearly 20% higher than the 201,250 reached in the second quarter.

"With Tesla delivering better-than-expected 3Q margin and EPS results, we believe the company is demonstrating the benefit of its software-defined vehicle architecture and the learning cycles it enables," said Oppenheimer analyst Colin Rusch, who carries and 'outperform' rating with a $1,080.00 price target on the stock.

"Tesla (also) continues navigating global supply chain challenges, we expect it to continue outperforming peers and to test demand elasticity with higher vehicle prices to support margins while ramping incremental capacity," he added.

Earlier this month, Tesla also unveiled plans to move its headquarters from California, its home for nearly two decades, to Texas, the site of its developing gigafactory and the home of SpaceX.

The decision, announced at the company's annual meeting in San Francisco, follows both Musk' personal move to the Lone Star State and a series of rows between the carmaking billionaire and the California authorities over issues including safety, taxes and COVID-19 precautions.

Musk also pledged to maintain the group's Freemont, California-based plant, adding he hoped to boost production there by 50% over the coming years.