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Why Tesla Stock Soared Thursday

By Daniel Sparks - Oct 24, 2019 at 12:21PM

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The company crushed estimates when it came to profits and free cash flow.

What happened

Shares of Tesla (TSLA -0.12%) jumped on Thursday, rising as much as 19.7%. As of 11:47 a.m. EDT the stock was up 16.6%.

The stock's gain follows the company's third-quarter results, which featured a surprising profit. In addition, the company's free cash flow was much higher than anticipated.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

In its third quarter, the electric-car company reported non-GAAP (adjusted) earnings per share of $1.86 -- well ahead of an average analyst estimate for a loss per share of $0.42. Free cash flow similarly crushed analyst estimates, coming in at $371 million. On average, analysts had expected Tesla to report free cash flow of $32 million. 

Another quarter of meaningful free cash flow helps ease concerns about the automaker's ability to be self-funding. The company has now reported positive free cash flow in four of the past five quarters, with trailing-12-month free cash flow of $975 million.

Now what

Looking ahead, management said it expects full-year deliveries to exceed the low end of its guidance range laid out at the beginning of the year for 360,000 to 400,000 units. The low end of this guidance range implies 45% year-over-year growth in deliveries.

In addition, management had upbeat news on its Shanghai factory, noting that trial production of the Model 3 is underway. Further, Tesla said it expects its Model Y to launch by summer 2020.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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