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Tesla (TSLA) jumps after hours, reports profit in Q3 2019 earnings release

Tesla shares jump over 10% on the news that the company turned a profit in Q3 2019.

Asif Khan

October 23, 2019 2:10 PM

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Tesla has just reported its Q3 2019 earnings results. The company is reporting $1.86/share in earnings on revenue of $6.3 billion. Analyst expectations were for a loss of $0.42/share on $6.3 billion of revenue. 

The whisper number on Wall Street had higher expectations of a $0.25/share losss on $6.61 billion of revenue. In the Q3 2019 investor update letter, the company said "Last year, our story was about ramping the Model 3. While total volumes are expected to grow by approximately 50% in 2019, this year our focus has been cost control and preparing for our next phase of growth."

Here are some highlights from the earnings report:

• Tesla increased their cash holdings by $383 million to a total of $5.3 billion.
• Model Y production is ahead of schedule, production expected by Summer 2020
• Compared to Q3 of 2018, the percentage of leased vehicles has tripled
• Energy storage deployment reached an all-time high of 477 MWh in Q3
• Highly confident in exceeding 360,000 deliveries this year
• Trial production of Model 3 in Shanghai has begun, ahead of schedule

Here are some highlights from the Tesla Q3 2019 earnings results conference call

• 6:36 PM ET: Elon thanks Tesla team for their execution in Q3. Record deliveries, made great strides in controlling costs.
• 6:37 PM ET: Musk praises Shanghai Gigafactory team for the speed of the buildout.
• 6:37 PM ET: Musk reiterates Model Y production ahead of schedule. Expects the car to outsell Model S, X, and 3 combine.
• 6:38 PM ET: Elon talks about Version 10. Smart Summon has been used over a million times.
• 6:39 PM ET: Elon says feature-complete full self driving appears to be on track for Early Access release by the end of 2019.
• 6:40 PM ET: Tomorrow afternoon, Tesla will release Version 3 of the Tesla Solar Roof.
• 6:41 PM ET: CFO touts margin improvements and cost-cutting. High production volume lead to better fixed cost absorption.
• 6:42 PM ET: Able to realize $30 million in deferred revenue in the quarter as Smart Summon shipped.
• 6:43 PM ET: Strong free cash flows touted, highest ever quarterly cash balance of $5.3 billion.
• 6:44 PM ET: Global order rate remains strong, and backlog is growing.
• 6:45 PM ET: Company touts Tesla Energy growth.
• 6:46 PM ET: Elon interjects about no long-term contract for California Tesla Energy customers in California and some other states.
• 6:47 PM ET: Cost of acquisition is lower than most of the solar competitors.
• 6:49 PM ET: Elon keeps interrupting. Working with Housing Authorities for Tesla Solar Roof approval.
• 6:50 PM ET: Working to improve time from order to install.
• 6:52 PM ET: Future is pretty exciting for Tesla Energy
• 6:52 PM ET: Q&A Begins
• 6:53 PM ET: Question about Tesla creating demand. Elon says that the company has no plans to do advertising. Word of mouth is sufficient. 
• 6:53 PM ET: What are you most excited about for Tesla beside Robotaxis. Elon says that Tesla Energy is being underestimated. Says the energy segment can grow to be the same scale as the automotive segment.
• 6:54 PM ET: Had to divert resources and engineering towards Model 3 as it ramped, now have restored those resources to Tesla Energy. "We had to do it, because if we didn't sell Model 3, Tesla wouldn't survive."
• 6:57 PM ET: Question about full self driving attach rates. Will Tesla sell some features separately? "We will continue to sell them bundled," says Musk.
• 6:58 PM ET: Focus is on FSD detecting stop signs and traffic lights. Driving on windy roads as well.
• 6:59 PM ET: "Won't have to pay attention (to FSD) by the end of next year." - Musk
• 7:00 PM ET: With respect to Model Y, what is the timeline for ramp and how should gross margin look?
• 7:00 PM ET: "Don't expect any Model 3 line downtime." - Musk. Model Y should have higher margins than Model 3.
• 7:00 PM ET: Update on FSD attach rates?
• 7:01 PM ET: Musk doesn't forsee the price dropping for FSD any time soon.
• 7:02 PM ET: Around $500 million of unrecognized revenue is due to FSD. 
• 7:02 PM ET: Details on the DeepScale acquisition?
• 7:03 PM ET: Musk: "Very tiny acquisition. Intent was to acelerate improvement of FSD."
• 7:04 PM ET: Update on Gigafactory 3 in Shanghai. What is the purpose of the third building?
• 7:04 PM ET: "We are in trial production of Model 3 (in China). Expect to hit volume production in several months." Third building for battery and module production.
• 7:05 PM ET: Update on Tesla Insurance?
• 7:05 PM ET: Working on getting other states and countries to support Tesla Insurance. Very happy with the reception in California.
• 7:06 PM ET: The goal is to provide an alternative to 
• 7:06 PM ET: Question regarding skepticism regarding FSD "Feature-Complete"
• 7:07 PM ET: "Feature-Complete means that the car will be able to drive from one house to work without any intervention."
• 7:08 PM ET: Three major levels to autonomy. 
• 7:08 PM ET: Analyst questions begin
• 7:09 PM ET: Color on sizing up the key factors on auto gross margin. Should investors be prepared for meaningful headwinds during Shanghai ramp?
• 7:10 PM ET: Amount of ramp inefficiencies hard to forecast at Shanghai Gigafactory. On margin improvement, S and X ASPs increased from Q2 to Q3. A lot of work was done on targetting price based on supply and demand. Cost reduction remains a focus of us. Nonrecurring items: Smart Summon revenue recognition was a factor. Foreign exchange also had a positive impact during the quarter.
• 7:11 PM ET: MS: Is it a fair assumption that Model 3 sold in China might be the most profitable car you sell?
• 7:12 PM ET: Hard to forecast. CFO talks about ramp inefficiencies again. Safe to assume it will be similar to margins in Fremont.
• 7:13 PM ET: 7 years after the launch of Model S, is it possible that Tesla could provide support to other car companies who have been slow to adopt EVs?
• 7:14 PM ET: It would be consistent with the mission of Tesla to help other car companies. It is something that we are open to. - Musk
• 7:14 PM ET: Software Version 10 adds functionality with an over-the-air update. Can you talk about the future of the software platform? Is there a monetization opportunity?
• 7:15 PM ET: Elon talks about how software is meant to maximize fun in the car. Haven't really thought about monetizing software. 
• 7:17 PM ET: Quantify the opportunity for emission credits?
• 7:17 PM ET: Emission credits are not a large part of our revenue. Not exactly a giant percentage. The credit situation in the U.S, is not great. We are not counting on some big windfall. - Musk
• 7:18 PM ET: We manage the business without counting on emission credits. It is just extra. - CFO
• 7:19 PM ET: Any update on the Tesla pickup truck? Secondly, clarify the order book situation and geographic mix.
• 7:20 PM ET: We've said enough about the Tesla Cyber Truck. I think the Tesla Cyber Truck is our best product ever.  - Musk
• 7:21 PM ET: Order rates are strong in all markets. - CFO
• 7:22 PM ET: Musk compares EV adoption to people upgrading from CRT TVs to HDTVs.
• 7:23 PM ET: How has thinking evolved on Model X and S?
• 7:24 PM ET: The Model X and S are really niche products. To be totally frank, we continue to make them more for sentimental reasons than anything else. - Elon Musk
• 7:25 PM ET: Increasing Model X and S production as demand increases. Delivery numbers in Q3 underestimate the demand for the Model S and X. - CFO
• 7:28 PM ET: Model Y followup: any expectation of Model 3 cannibalization when Y launches?
• 7:29 PM ET: "When we launched Model X, Model S sales increased." - Musk
• 7:30 PM ET: Targeting 3000 units, but we saw the ramp in Model 3 was lumpy in Fremont. How smooth should we expect production to be at Shanghai Gigafactory?
• 7:30 PM ET: It should be smoother than the Model 3 Fremont ramp.  - Musk
• 7:31 PM ET: It will be a very rapid and steady ramp. - Musk
• 7:31 PM ET: What does reallocation of resources look like?
• 7:31 PM ET: Storage and Solar will both benefit. - Musk
• 7:32 PM ET: Conference call ends.

Full Disclosure:

At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long Tesla via TSLA shares

Asif Khan

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.