Optimism for the stock over the last two days follows the company's surprise third-quarter profit. The company's bottom line and free cash flow were both much better than expected during the period.
Friday's gain, specifically, is likely due in part to news that several bearish Tesla analysts raised their price targets for the stock, as well as a continuing short squeeze as short-sellers cover their short positions.
Tesla's third-quarter revenue was about in line with analyst estimates. But its non-GAAP (adjusted) earnings per share came in at $1.86 -- far ahead of analysts' average forecast for a non-GAAP loss per share of $0.42. In addition, management reiterated that it believes its business has scaled to the point of being self-funding.
Following the surprise profit, some analysts with the lowest price targets on Tesla stock lifted their outlooks. Barclay's analyst Brian Johnson increased his target from $150 to $200; Credit Suisse analyst Dan Levy boosted his target from $189 to $200; and JPMorgan analyst Ryan Brinkman boosted his target from $200 to $220. Their price targets, of course, still imply downside from the growth stock's current price of $328. But an improved outlook from prominent bears may have spooked some short-sellers and prompted them to cover their positions.
For now, Tesla will need to execute well during its important holiday quarter. In order for the company to achieve its guidance to deliver 360,000 or more deliveries during 2019, the automaker will need to deliver about 105,000 vehicles during the period. This would be a quarterly record for the company.
Looking further out, Tesla will have to prove that it can remain profitable and truly be able to self-fund its business.