Tesla Shares Rise on Q3 Profit Beat

AFP  File | US officials are investigating whether Tesla misled investors about meeting key production targets for the Model 3 car

Rising 12 percent at one point in early trading, the move in shares added as much as $6 billion (R87 billion) to Tesla's market value, capping a tumultuous few months for the company and its billionaire chief executive, Elon Musk. The FBI is said to be looking into the company's Model 3 production claims to see if it misstated information and potentially misled investors. Gross margins on the Model 3 are above even the company's own lofty expectations and its position as the 5th most popular auto by volume in the U.S. suggests it's drawing in a wide range of customers despite its comparatively high price point.

Electric vehicle maker Tesla on Wednesday reported an "historic" quarterly profit driven by demand for its mass market Model 3, as the company looks beyond its United States home base to Europe and China. It has previously been reported that the Justice Department is focusing its investigation on Tesla's Model 3 production problems dating back to past year and that a criminal securities-fraud probe relating to Tesla's statement's about the vehicles is intensifying.

"Ultimately, given difficulties that we did not foresee in this first-of-its-kind production ramp, it took us six months longer than we expected to meet our 5,000 unit per week guidance", the spokesperson said.

Tesla and Musk have been under heightened scrutiny since Musk on Twitter floated a proposal in August to take Tesla private, saying he had "funding secured" for a deal.

Tesla's free cash flow was reported at $881 million during the past three-month period. The CEO said during a May 2016 earnings call that Tesla would aim to produce 100,000 to 200,000 Model 3 sedans during the second half of 2017.

Company shares hit a record in August but decreased again as Musk was sued by short-sellers and US regulators for tweeting, and then swiftly postponing, a plan to take the company private. Last quarter, however, Model 3 sales pushed Tesla into the black. Shortening the time cars are in transit so that revenue can hit the books more quickly would shorten its cash conversion cycle, boosting cash flow. The aim is to shift up to a million cars a year outside the US. That was the equivalent of $1.75 per share, up from a loss of $3.70 per share in 2017. CEO Elon Musk called the profit - which he had promised shareholders earlier this year - "truly historic".

"The combination of improved corp governance and meeting operational milestones allow us to become more optimistic on TSLA shares", according to Canaccord Genuity.

"Drivers will pay more for Musk it would seem".

Prior to Q3 2018, Tesla has only had two profitable quarters since going public in 2010, and Musk's affirmations of profitability by the end of 2018 had been met with deep scrutiny.

For Tesla, turning a profit was not its only notable achievement in the third quarter; it also stopped burning through its cash.

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