• Tesla stock soared 22% on Thursday, its best day in 11 years, following its better-than-expected Q3 earnings report
• Tesla’s profit margins were boosted by $739 million in revenue from environmental regulatory credits
• Elon Musk predicted vehicle growth of 20-30% for 2025, higher than analysts’ expectations of around 15%
Tesla shares surged on Thursday following the company’s better-than-expected third quarter earnings report. The stock’s 22% gain was its best single day performance in over 11 years.
Earnings Beat Analyst Expectations
Tesla reported revenue of $25.18 billion, which was slightly under analysts’ expectations of $25.37 billion, but still represented an 8% increase year-over-year. Tesla’s earnings per share of $0.72 cents, adjusted, handily beat the average analyst estimate of $0.58 cents.
“We expect this surprising earnings beat to power a strong positive reaction in Tesla shares Thursday given the degree to which investors have become conditioned to earnings misses from the company,” analysts at JPMorgan wrote in a note.
Regulatory Credits Boost Margins
Tesla’s profit margins in the third quarter were boosted by $739 million in revenue from the sale of environmental regulatory credits. Analysts at JPMorgan noted these credits are a potentially unsustainable earnings and cash flow driver for Tesla.
Automakers are required to obtain regulatory credits if they don’t meet fleet emissions targets. Tesla has excess credits to sell because it only makes electric vehicles.
Musk Predicts 20-30% Growth in 2025
CEO Elon Musk said on the earnings call that his best guess is vehicle growth will reach 20-30% next year, citing lower cost vehicles and the advent of full autonomy. Analysts surveyed by FactSet were only expecting delivery growth of about 15% for 2025.
Even bullish analysts doubted Musk’s forecast. “Our view remains more reserved at 10-15% [growth] in 2025,” Deutsche Bank analysts wrote.
Robotaxi Plans for 2026
Musk said Tesla plans to start production of its recently unveiled Cybercab, a robotaxi with no steering wheel or pedals, by the end of 2026. He also said Tesla would conduct driverless ride-hailing in California and Texas next year using existing vehicles.
Bernstein analysts remain skeptical of Tesla’s self-driving capabilities. “We continue to struggle to see Tesla overcoming the technological and regulatory hurdles needed to leapfrog current level 4 robotaxis and believe fully unsupervised FSD could be years away,” they wrote.
