Tesla’s Cars Are Doing Well, But Tesla Energy is the Star

Tesla Motors Factory Model S
Source: Tesla Motors/Facebook

Casual investors holding stock in Tesla awoke to a rather pleasant surprise on Wednesday morning. Had they checked their account balances, they would see that their holdings in Tesla rose by roughly 7% in early trading, and by the end of the day had closed up by about 11%, or about $20 per share. That’s because, though the company missed analyst estimates for both earnings per share and revenue, they remained upbeat about its guidance and — despite the misses — there were no glaring faults or flags for investors to take issue with.

Tesla remains committed to showing the Model 3 — Tesla’s first truly mass-market vehicle — in March of next year, a significant catalyst for the company, and its shares. Although Model 3 wouldn’t become commercially viable until 2017, Tesla now has the Model X SUV to rely on in the interim. “In Q3, global Model S orders increased by more than 50% from a year ago, and grew at a faster pace in North America, Europe, and Asia, than during Q2,” Tesla commented in its letter to shareholders. “In China, our newest major market, Q3 Model S orders increased substantially from Q2, due in part to the opening of two new retail locations,” the company said.

Helping bolster Tesla’s stock were 11,603 deliveries of vehicles (a record) and 13,091 units produced (also a record). It reiterated that for 2015, it aims to target between 50,000 and 52,000 units produced. Tesla will “achieve steady state production capacity” of the Model X moving into 2016.

Source: Tesla

Financially, Tesla reported a non-GAAP net loss of $75 million ($0.58 per share), on non-GAAP revenue or $1.24 billion, up nearly 33% from the year-ago quarter. The company’s cash-burn rate has been a favorite target of Tesla bears, despite the fact that Tesla is now maintaining production of two vehicles, planning three more (the Model 3, a new Roadster, and the mysterious “Model Y,” which may or may not be the Roadster), and building what will be the largest battery factory in the world.

It’s also building it’s own charging networks in three continents, and spearheading sales efforts in countries around the world — so yes, Tesla will have a rather significant cash-burn rate. It’s estimated that bringing a conventional car to market using existing components can cost as much as $1 billion. Tesla’s vehicles don’t have a blueprint to work from, and a small parts bin to pick through, so everything has to be done for the first time.

Also significantly, the company scored $33 million in pre-owned Model S sales, on which Tesla commented, “The number of pre-owned Tesla vehicles that we sold in Q3 exceeded the number of customer trade-ins that we received, leading to a 17% sequential reduction in trade-in unit inventory.” Tesla aims to produce 15,000 to 17,000 vehicles for the fourth quarter and deliver 17,000 to 19,000 vehicles, which will result in 50,000 to 52,000 total deliveries for the year, it said. That will meet or beat Tesla’s ambitious forecast that it set a while ago.

Further, Tesla announced that it was making strong progress on the construction of the Gigafactory, and global demand was high for Tesla Energy products. “We have also accelerated plans to begin cell production for Tesla Energy products at the Gigafactory by the end of 2016,” Tesla said. “This is several quarters ahead of our initial plan.”

Tesla Model S
Source: Tesla

Tesla Energy, which produces the Powerwall home battery system as well as batteries for industrial applications, is the company’s first foray outside of automotive applications. Once up and running at full capacity, the Gigafactory will take over Tesla Energy production from its limited capacity in Fremont, as well as produce cells for the Model 3 at great enough volume to allow for it’s speculated $35,000 base price.

For Tesla investors, that was all enough to warrant a healthy climb in stock price. Tesla is not traded on its sales this quarter or the next — it’s traded on the vision of what the company can be, making it especially volatile and hotly debated. Regardless, it’s apparent that whatever investors will be doing, Tesla will be doing what it does best: pushing forward.

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