Tesla achieved profitability for Q3 2018

Oscar PerryOct 28, 2018

For months critics have been warning that cash flow problems threatened the company's survival. The stock finished up 5.1 percent and surged 27 percent for the week, buoyed by a blowout earnings report.

". Although these were not sustainable, and [it's] likely the same case now".

The configurator for the Model 3 will also be activated this year in Europe as well as China this year, which formally allows for vehicle orders. Where will that leave us in the future?

Shipment of vehicles to China will begin late in the first quarter or early in the second quarter, which is sooner than Musk had predicted earlier, will help to offset any potential losses for the time being and he expects the any drop to stabilize at about the 5,000-unit mark for USA buyers.

That's not to deny that Tesla faces continued challenges. BofA foresees similar struggles.

"We believe the TSLA narrative is starting to change as the company transitions to becoming sustainably profitable", Baird Research analyst Ben Kallo said.

Evercore ISI was slightly more optimistic, although similarly cautious. The Model Y is created to be sold in volumes comparable to the Model 3.

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The Q3 metrics were more warmly received by others on the Street. "Profitability is getting better at a rate where the company is on track to generate enough cash to meet its $1.7 billion debt obligations". Between publicly issued bonds and loans from banks and other entities, Tesla has about $2.2 billion due by November 2019.

"Simply put, deliveries and earnings are the only battles that matter", said Gene Munster, an analyst with well-known tech venture capital firm Loup Ventures. The targets appear particularly feasible given recent success among consumers who were previously outside the market for premium vehicles, Loup said.

While Tesla tries to shake up the industry, long-established automaker Ford Motor Co. reported a net profit decline of 37 percent in the third quarter as sales slowed in the US and China.

BofA countered that the gains could take a while to manifest.

Tesla has also improved efficiency, ramping up the gross margin on Model 3 vehicles to more than 20 percent, according to Musk.

In the new business report, Tesla announced their intention to begin production at the Shanghai facility earlier than originally planned: The first Model 3 will roll off the production line in Chine before the end of 2019. Say we have the following: Uber, Lyft, Tesla, Waymo, Daimler, Cruise and Ford (F), the last of which is working on its own solution.

"Our earnings profile has flipped dramatically", Musk and chief financial officer Deepak Ahuja said in a letter to shareholders. That ramp-up is now largely over, so Tesla is generating cash, not consuming it.

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