Tesla shares rise 13% thanks to a rise in earnings and Elon Musk's 'best estimates'

Tesla (TSLA) stock remains strong in trading on Thursday after the company delivered earnings that largely surprised Wall Street and Elon Musk offered a new round of bullish forecasts.

The automaker reported improved operating margins, automotive gross margins excluding the benefits of regulatory credits and better earnings per share than analysts had expected for the July-September quarter. The company also reported better-than-expected net income and its lowest cost per good sold ever at about $35,100 per vehicle.

It is the first time in seven quarters – almost two years – that Tesla has increased its profits.

Cannacord Genuity analyst George Gianarikas reiterated his Buy rating and increased his price target to $278 per share from $254 per share. A number of analysts at companies such as KGI Securities and Goldman Sachs (GS) also raised their price targets. JP Morgan (JPM) analysts maintained their underweight rating and increased their price target to $135 per share from $130 per share.

“There is still more wood to chop for Tesla and this recovery story still has some challenges ahead to convince the Street that 2025 will be a true watershed year,” Wedbush Securities analyst Dan Ives said in a note on Thursday and added that Tesla has taken its “first big step” toward recovery. Wedbush maintained its price target of $300 per share and an outperform rating.

Tesla shares were down about 2% as the market closed on Wednesday. As of early Thursday morning, shares are up more than 13%, back to about where they were before Tesla's “disappointing” robotaxi product demonstration left Wall Street with more questions than answers.

On Wednesday, Musk gave investors a lot to look forward to, assuming his promises and estimates hold true. He reiterated that the company aims to increase production of its Cybercab robotaxis in 2026, ultimately producing between 2 and 4 million units per year. That's more units than Tesla sells electric vehicles.

“This will be in more than one factory, but I think it's at least 2 million units a year, maybe 4 million in the end,” Musk said, adding that he was speaking from his “best guesses.”

Musk also said Tesla expects to offer ride-sharing services next year in at least two states, California and Texas, where he also wants to get regulatory approval for “fully autonomous, unattended” Full Self-Driving (FSD). Many valuations of Tesla's current and future stock price take into account a planned robotaxi network that Musk has described as a “combination of Airbnb (ABNB) and Uber (UBER).”

Tesla operates its own ride-sharing network for employees at its factories in California's Bay Area with current models and a driver behind the wheel, executives said Wednesday. Palo Alto, California, is in talks to use Tesla's newly unveiled robotaxi in its ride-sharing program, but the company doesn't plan to start producing those cars until 2026.

Tesla has sold more than 1.29 million electric vehicles so far in 2024, including 462,890 units delivered between July and September. That doesn't give the company much room to meet or exceed 1.8 million sales by year-end – the record set in 2023. However, the automaker said it expects “slight growth” in deliveries this year, which will boost sales of more than 516,000 units in the fourth quarter.

Musk said his “best estimate” is that deliveries will reach 20% to 30% growth next year, citing Tesla's plans to start selling more affordable models in early 2024.

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