Tesla’s stock surged 22% on Thursday, its biggest single-day gain since 2013, closing at $260.48. This impressive leap followed the company’s better-than-expected earnings report, which energized investors and surprised many analysts.
Earnings Report Highlights
Tesla reported $25.18 billion in revenue for the third quarter, slightly below the expected $25.37 billion. However, the company exceeded earnings expectations, delivering adjusted earnings per share (EPS) of 72 cents, which beat the 58-cent estimate. Despite missing revenue targets, Tesla’s 8% year-over-year growth and its EPS surprise sent the stock soaring.
JPMorgan analysts noted, “We expect this surprising earnings beat to power a strong positive reaction in Tesla shares Thursday, given the degree to which investors have become conditioned to earnings misses from the company.”
Profit Boost from Regulatory Credits
Tesla’s profit margins were bolstered by $739 million in revenue from environmental regulatory credits. These credits, which automakers purchase when they can’t meet emissions standards, have been a substantial, though perhaps unsustainable, part of Tesla’s earnings.
Tesla benefits from an excess of these credits due to its all-electric vehicle lineup, but JPMorgan cautioned that relying on these credits may not be a long-term solution for sustaining high profit margins.
Full Self-Driving (FSD) Revenue and Future Growth
Tesla’s Full Self-Driving (FSD) system also contributed to the company’s earnings, generating $326 million in revenue after being integrated into the Cybertruck and with new features like “Actually Smart Summon.”
Elon Musk, Tesla’s CEO, provided an optimistic outlook during the earnings call. He predicted vehicle growth of 20% to 30% in 2025, driven by lower-cost vehicles and the advancement of autonomous driving technology. While Musk’s projection exceeded many analysts’ expectations, not everyone is convinced.
Deutsche Bank analysts were more cautious, predicting a 10-15% growth rate, assuming Tesla introduces a cheaper version of its Model Y priced under $30,000.
Similarly, Morgan Stanley set a more modest vehicle delivery growth estimate of 14%, citing the need for more affordable models and improved financing options.
Skepticism Around Autonomous Vehicles
While Musk remains bullish on Tesla’s autonomous driving future, with plans for a “Cybercab” robotaxi by 2026 and driverless ride-hailing in California and Texas next year, analysts are skeptical.
Bernstein analysts, who have a bearish outlook on Tesla with a price target of $120, raised concerns about Tesla’s ability to overcome technological and regulatory challenges for fully unsupervised driving.
They noted Musk’s history of overpromising on FSD, pointing out that Tesla still lags behind competitors in robotaxi development.
While Musk’s ebullient tone during the earnings call excited Tesla bulls, Bernstein’s analysts remained cautious, stating, “We continue to struggle to see Tesla overcoming the technological and regulatory hurdles needed to leapfrog current level 4 robotaxis.”
A Record Day for Tesla Stock
Tesla’s 22% surge was its sharpest stock rally since May 2013, when it gained 24%. This rally wiped out the company’s losses for the year and left the stock up 3% in 2024, though it still lags behind the Nasdaq’s 22% gain.
Despite the optimism from some corners of Wall Street, Tesla’s future—especially around autonomy and affordability—continues to divide analysts.
The excitement from Thursday’s stock rally reflects the company’s potential, but it also underscores the uncertainty about whether Tesla can meet the ambitious targets Musk has laid out.
