Meet the new, profitable, Tesla

Over the last 10 years Tesla CEO Elon Musk has been promising Wall Street that his electric car company woul...

Posted: Oct 26, 2018 3:22 PM
Updated: Oct 26, 2018 3:22 PM

Over the last 10 years Tesla CEO Elon Musk has been promising Wall Street that his electric car company would eventually make money.

Wednesday he finally made good on that promise. Shares closed up 9% Thursday after the company posted its best quarter ever the previous evening.

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The big question now is whether the company can remain profitable.

Tesla's strong report showed that overall manufacturing costs for each vehicle declined by 30%. The number hours it takes to build each car fell too.

That was enough for skeptical Tesla analyst Garrett Nelson to change his tune.

"The results look to be sustainable going forward," the CFRA Research analyst said.

Nelson upgraded his recommendation on the stock after the earnings report. He said he is now confident that Telsa will be able to continue to reduce its costs.

Tesla's (TSLA) stock had lost about a third of its value since hitting a record high of $385 a year ago.

The stock has been dogged by concerns that the company couldn't hit production targets, was burning through too much cash and was facing looming debt payments.

Musk promised investors for months that the company would be profitable in the second half of 2018, but Wall Street had become very skeptical.

"We had our doubts," Nelson said. "This is a company that has a long history of overpromising and under delivering."

Tesla's profitability comes just in the nick of time because $1.7 billion in debt is due by November of next year.

The company that was burning through funds reported that its cash reserves increased by $731 million during the quarter.

Musk told analysts that going forward, his company will be adding to its cash reserves instead of burning through money to boost production.

"I said before that we must prove that Tesla can be sustainably profitable," he told analysts Wednesday. "This quarter was an important step towards that and I'm incredibly excited about what lies ahead."

Gene Munster, a leading tech analyst with Loup Ventures, said its good to see the focus return to Tesla's business and not on Musk's erratic behavior.

In August, Musk tweeted a plan to take the company private, only to drop the plan less than three weeks later. The Securities and Exchange Commission fined him $20 million and required him to give up the chairman post because of a false statement that he had "funding secured" for such a move when he did not.

Musk also drank alcohol and smoked pot on a podcast, maligned a man who helped in the rescue of a Thai soccer team trapped in a cave, and lambasted analysts on a conference call.

The behavior spooked many investors, and Munster said he's not sure the great quarter will be enough by itself to convince everyone that the company is a safe investment.

"I think it was the important step they've taken, but we're not out of the woods yet," Munster said.

Morgan Stanley auto analyst Adam Jonas, who still has a neutral rating on the stock, said that he and other investors will want to see Tesla repeat this performance in the fourth quarter and beyond before the stock can regain some of the ground it lost in the last year.

But even one of Tesla's harsher critics has said he expects that Tesla's stock will now start to regain lost ground. John Thompson CEO of hedge fund Vilas Capital Management, said he has now closed his short positions which bet on a continued decline in the price of the stock.

"My estimates of their demise have been greatly exaggerated," he said. "In the long run it doesn't change anything. But in the short run they've pulled the rabbit out the hat."

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 307519

Reported Deaths: 7096
CountyCasesDeaths
DeSoto20772248
Hinds19888408
Harrison17489302
Rankin13311275
Jackson13097243
Madison9895210
Lee9856169
Jones8290160
Forrest7523146
Lauderdale7187237
Lowndes6262144
Lamar610584
Lafayette6027117
Washington5280132
Bolivar4769129
Oktibbeha455297
Panola4442103
Pearl River4419139
Warren4280118
Marshall4273100
Pontotoc416472
Monroe4057132
Union403675
Neshoba3987176
Lincoln3869108
Hancock372085
Leflore3468124
Sunflower329389
Tate322681
Pike3180104
Scott310572
Yazoo304368
Alcorn297764
Itawamba296776
Copiah292965
Coahoma289677
Simpson287484
Tippah284668
Prentiss275659
Marion265779
Wayne261341
Leake261073
Grenada254982
Covington254580
Adams245882
Newton244859
George237847
Winston225981
Tishomingo222067
Jasper219748
Attala213273
Chickasaw204857
Holmes186471
Clay182454
Stone179131
Clarke176876
Tallahatchie175240
Calhoun163230
Yalobusha158836
Smith158534
Walthall130543
Greene129433
Lawrence126223
Noxubee125933
Montgomery125542
Perry125138
Carroll120826
Amite120041
Webster113432
Jefferson Davis105432
Tunica102525
Claiborne101330
Benton97225
Kemper95226
Humphreys94332
Franklin81823
Quitman78916
Choctaw72817
Jefferson64828
Wilkinson64727
Sharkey49617
Issaquena1686
Unassigned00

Alabama Coronavirus Cases

Cases: 518899

Reported Deaths: 10712
CountyCasesDeaths
Jefferson753641487
Mobile37763798
Madison33859494
Tuscaloosa25266443
Montgomery23962565
Shelby23106238
Baldwin20631300
Lee15524165
Calhoun14284311
Morgan14139268
Etowah13662345
Marshall11957219
Houston10380278
Elmore9993200
Limestone9811147
Cullman9470188
St. Clair9426234
Lauderdale9215227
DeKalb8746181
Talladega8058171
Walker7087275
Jackson6754110
Autauga6723103
Blount6483135
Colbert6203130
Coffee5399112
Dale4767110
Russell428838
Franklin419982
Chilton4083109
Covington4053114
Tallapoosa3893146
Escambia387674
Dallas3527149
Chambers3499122
Clarke346360
Marion3065100
Pike305875
Lawrence295395
Winston272372
Bibb256258
Marengo248661
Geneva245875
Pickens232959
Barbour224755
Hale218775
Butler212266
Fayette208960
Henry187844
Cherokee182044
Randolph176941
Monroe171440
Washington164038
Macon154548
Clay149354
Crenshaw149257
Cleburne146041
Lamar139234
Lowndes136453
Wilcox124327
Bullock121340
Conecuh109028
Perry107926
Sumter102932
Coosa99228
Greene90734
Choctaw58724
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