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Tesla 3Q18 results impress

Tesla reported better-than-expected 3Q18 results on Wednesday (24 October), with adjusted earnings coming in at $2.90/share vs a Refinitiv consensus expected loss of $0.19/ share. Revenue also beat expectations surging to $6.82bn vs the Refinitiv consensus forecast of $6.33bn. Tesla posted net income of $311.5mn, or $1.75/share, compared with a loss of $619.4mn, or $3.70/share in 3Q17. This was Tesla’s third profitable quarter and compares with an adjusted loss of $520mn in 3Q17. The electric vehicle (EV) manufacturer’s results also showed better-than expected car sales and a faster timeline on its Model 3 production. Tesla said its mid-size Model 3 sedan, which it wants to mass produce, was the best-selling car in the US when measured by revenue and the fifth best-selling car in terms of volume. The company says it delivered 56,065 Model 3 vehicles to customers during the quarter and 27,710 Model S and X vehicles. Capex spending in 3Q18 was below the consensus analyst estimates at $510.3mn, while total capex spending for the year is expected to be below $2.5bn.

CNBC reports that CEO and founder, Elon Musk previously said that the EV manufacturer would become “sustainably profitable” by now, having had just two profitable quarters prior to last week’s report since it listed in 2010. Tesla told investors on the conference call that its production rates will improve, with the number of labour hours to build the Model 3 down by 30%-plus QoQ, while it also took less time to build than the Model S sedan and Model X sport utility vehicle (SUV) — another first for the firm. Strong demand for its Model 3 buoyed the results and Musk noted on the conference call that demand for Model 3s was “probably on the order of anywhere from 500,000 to 1mn cars” p.a.

Tesla is also accelerating its Model 3 production overall and working to get it started in China where the company has bought land for a factory. Musk said that Tesla will be producing Model 3s in China next year and, longer-term, will also manufacture batteries there. According to a Reuters report earlier in October, Tesla’s factory in Shanghai would help it minimise the impact of tariffs there, which it said increased the tax rate on its EVs sold in China to 40% vs 15% for all other imported cars. Tesla’s cash position improved by $731mn in 3Q18, despite the firm repaying $82.5mn in bonds. The company said it had $881mn in free cash flow and expects “flat or positive free cash flow next quarter as well, even with greater debt coming due.”

Looking ahead, Tesla confirmed that it expects to generate a profit during 4Q18 as well.

Tesla shares soared by more than 12% following the results report and the share price is up 14.4% from its close on 24 October to Tuesday (30 October) .

Meanwhile, The Wall Street Journal (WSJ) reported on Friday (26 October) that the FBI is conducting a criminal investigation into whether Tesla misstated production figures about its Model 3 sedan and misled investors about its business. According to The WSJ, FBI agents are contacting former Tesla employees to interview them. The article cited anonymous people familiar with the matter. A Tesla spokesperson said the company cooperated with a “voluntary request” for documents from the Department of Justice (DoJ) earlier this year but has had no additional requests for months.




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WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.