On Wednesday after the close, Tesla released their third-quarter results. After a muted reaction to their Robotaxi launch, expectations weren't exactly peaking. Fortunately, the numbers impressed, and the stock initially shot up 12% in after-market trade and pushed higher during the day to a 22% gain!
In the earnings call, Elon mentioned that they produced their seven millionth vehicle this quarter. Tesla is now an established business that had positive free cash flows of $2.7 billion for the three months. The company sits on around $33.6 billion in cash, a strong war chest if ever needed. I remember the days, not so long ago in 2018, when they were hours away from running out of money.
There is a lot of focus on their margins after they were forced to cut prices because of the fast interest rate hikes in 2022 which squeezed demand. Operating margin came in at 10.8%, a solid rise from 6.3% in the last quarter. This is a big reason why the shares popped. Even the Cybertruck (pictured) has turned to profit after many years of loss-making.
Out of the $25.2 billion in revenue, $20 billion is from cars. The rest comes from their renewable division which is finally gathering momentum. That business had a solid gross margin of 30.5%.
As interest rates come down, we expect EV demand to pick up. Their existing business is ticking along nicely. The upside here will come from one or more of their side hustles: self-driving cars, CyberCabs, and robots. Expect lots of excitement and quite a few failures along the way.