Credit where credit’s due — the Tesla share price is soaring after Q3 earnings

The Tesla share price is climbing on news that regulatory credits are continuing to boost the company’s profits. But has the time to buy the stock passed?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Tesla (NASDAQ:TSLA) share price jumped 12% in extended trading on Wednesday (23 October) after the company announced its Q3 earnings. The results were good. 

Created with Highcharts 11.4.3Tesla PriceZoom1M3M6MYTD1Y5Y10YALL24 Oct 201924 Oct 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

Revenues and deliveries came in lower than anticipated. But earnings per share were higher than expected and that was enough to send the stock soaring.

Low expectations

It’s probably fair to say the market was pessimistic ahead of Tesla’s Q3 earnings report. The stock had fallen 15% in the previous three months and most of the news had been bad.

Should you invest £1,000 in easyJet right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if easyJet made the list?

See the 6 stocks

According to reports, the company had been offering significant discounts and incentives to boost volumes. Worse yet, this didn’t seem to be resulting in a big increase in car sales.

On this front, there weren’t really any surprises. Automotive revenue grew 2% and deliveries were up 6% – neither of which is spectacular for what is uncontroversially a growth stock.  

Despite this, there was a familiar source of income for Tesla shareholders. And this caused earnings per share to climb 21% and come in ahead of expectations.

Regulatory credits

Tesla reported $2.17bn in net income for Q3, which was up from $1.85bn during the same period last year. But around a third of 2024’s net income came from selling regulatory credits.

There are a couple of ways of viewing this. One idea is that investors should be concerned that profits from the core parts of the business weren’t actually that impressive. 

Another is that Tesla’s found a way to grow its profits in what’s clearly a difficult economic environment. And its ability to do this is a significant competitive advantage over its rivals. 

Despite not being a Tesla bull, I’m firmly in the second camp. The most important thing for a cyclical business is how it fares in a downturn and the firm showed some unique strength here.

Outlook

In its update, Tesla pointed to a lot of things for investors to be excited about. These included the launch of its robotaxi network, more affordable cars, and strong Cybertruck sales. 

Historically, things haven’t always gone the way that Elon Musk has forecasted, so I’m a little wary of taking this as given. But I think there are definitely reasons for optimism. 

The arrival of cheaper vehicles in early 2025 looks realistic to me. I don’t think it’s hard to see how Tesla could use its scale and manufacturing base to produce cars at competitive prices.

I’m less certain about the robotaxi launch though. The event earlier this month failed to impress and there are still regulatory challenges ahead that might prove significant. 

Has the opportunity gone?

I thought Tesla’s Q3 earnings report was a real show of strength, so I’m not entirely surprised to see the stock climbing sharply. I don’t think a rising share price means an opportunity has passed though. 

The share price is still below where it was at the start of the year and the business has only moved forward in that time. For me though, it’s still a long way above where I’d be comfortable buying it.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Watches of Switzerland shares 1 year ago is now worth…

Watches of Switzerland shares have been decimated by Trump’s tariffs on Switzerland. Dr James Fox explores whether this is an…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Growth stocks are crashing! Here’s what I’m doing now

Our writer shares his thoughts as growth stocks get crushed, as well as a favourite from the Nasdaq that he…

Read more »

Investing Articles

What’s going on with the Nvidia share price now?

The Nvidia share price is tanking. Once the most valuable listed company, Nvidia has seen more than $1trn wiped off…

Read more »

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »