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Record Deliveries and Earnings Make Tesla Stock One to Buy

Matt McCall and the InvestorPlace Research Staff
·5 min read

Tesla (NASDAQ:TSLA) isn’t giving the bears what they want, which is a collapse into oblivion. And while TSLA stock has been volatile, the past year has really been one giant victory lap for the bulls.

A black Tesla (TSLA) Model S is parked between rows of charging stations.
A black Tesla (TSLA) Model S is parked between rows of charging stations.

Source: Grisha Bruev / Shutterstock.com

At its highs, Tesla stock commanded a market capitalization in excess of $450 billion. That made it one of the largest stocks in the entire market. Think about that for a minute: The company that seemingly everyone hated became one of the most valuable entities in the country.

From its low on Aug. 11 to its high on Sept. 1, TSLA stock surged more than 70%. Admittedly, that was a bit exuberant — particularly given its market cap at that point — as the rally was being driven by momentum ahead of its stock split.

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However, the latest quarter highlights why the stock has had momentum.

Earnings, Deliveries Beat

Earlier this month on Oct. 2, Tesla reported third-quarter deliveries of 139,300 vehicles. More than 124,000 of those vehicles were the Model 3 or Model Y. This result was able to top consensus Wall Street expectations of 137,000 and crushed its previous deliveries record of 112,000.

A few weeks later, the company impressed again. Non-GAAP earnings of 76 cents per share beat estimates by 16 cents. On a GAAP basis, Tesla also turned in a profitable quarter, its fifth straight quarterly net income.

Additionally, revenue of $8.77 billion grew almost 40% year over year and beat estimates by a good amount. Can we talk about that for a minute? At a time where the global economy is getting thrashed, Tesla found a way to generate 40% revenue growth and churn out record deliveries.

Talk about impressive.

Even better, automotive margins climbed to 27.7% in the quarter. That was up from 25.4% sequentially and easily beat analysts’ expectations of 24.1%. Versus the same quarter a year ago, Tesla’s automotive gross margins increased significantly from 22.8%.

Breaking Down TSLA Stock

We’ve talked about deliveries and vehicles, but notice that I haven’t yet called Tesla an automaker. That’s because I consider Tesla a tech company with an automotive business unit. That’s as Tesla continues to make progress on the autonomous driving front and also has an energy unit.

Moreover, Tesla continues to deploy systems as it works on its solar roof approach. In fact, the company said, (bold emphasis added):

“Our energy storage business reached record deployments of 759 MWh in Q3. Megapack production continued to ramp at Gigafactory Nevada as production volumes more than doubled in Q3.

Powerwall demand remains strong and is growing, particularly as our solar business grows as many customers include a Powerwall with their solar installation. Additionally, we are seeing accelerating interest in Powerwall as concerns with grid stability grow, particularly in California. We continue to believe that the energy business will ultimately be as large as our vehicle business.

You see, the energy unit of Tesla has huge potential as consumers, municipalities, states and entire countries start to alter the way they view energy consumption. The world is making an enormous shift to green energy, and Tesla is in prime position to leverage that shift.

However, the company is also properly preparing for the future — like any great company with a visionary CEO. And despite doubts aplenty regarding Gigafactory 3 in Shanghai, the factory went up in impressive time.

Now, Tesla is working on factories in Germany and Texas, as it gears up for the Cybertruck, Roadster and Semi. Regarding the German factory, Tesla expects production to start next year.

To get these jobs done, Tesla raised an additional $5 billion in cash in September. Some investors may not like the dilution, but honestly, I love it. A company like Tesla needs capital, particularly when liquidity was the bears’ strongest argument. And with CEO Elon Musk owning tons of the stock and plenty of long-term investors in the name, why not raise funds?

In fact, Bank of America analysts argue that Tesla should raise even more capital. Last quarter, it ended with more than $14.5 billion in cash and equivalents and had positive operating cash flow.

Volatility Is Your Friend

Weekly chart of Tesla stock.
Weekly chart of Tesla stock.


Click to Enlarge
Source: Chart courtesy of StockCharts.com

Last but not least, volatility is our friend. TSLA stock goes through its ebbs and flows — like any other stock. It will not go up forever, so enjoy the sunshine as it bakes down upon us.

After spending a few years in a sideways trading pattern, Tesla stock is up more than 500% in the past year. Amid that pattern, bulls had plenty of days to rejoice and plenty of days spent tending their wounds.

Now, they need to remember that the painful stretches are an opportunity to buy. Those who bought the deep dips in TSLA stock have reaped handsome rewards. And I don’t expect that to change going forward.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Matthew McCall left Wall Street to actually help investors —by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now.

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