Markets Close Just Below Record Highs as Tesla Keeps Growing

The stock market continued to gain ground on Wednesday, with the Dow Jones Industrial Average (^DJI 0.56%) and S&P 500 (^GSPC -0.88%) closing just shy of their record levels. A modest decline for the Nasdaq Composite (^IXIC -2.05%) showed some of the anxiety that investors have about inflationary pressure and rising interest rates, which could weigh on valuations for high-growth stocks.

Data source: Yahoo! Finance.

When Tesla (TSLA -1.92%) is up to bat with earnings results, many investors pay close attention, and coming into Wednesday afternoon's release of third-quarter financial information, expectations were high that the electric vehicle pioneer would be able to sustain its strong momentum. Even though Tesla stock fell slightly immediately after the report came out after the end of the regular trading session, the numbers the company gave were encouraging in many ways. Let's take a closer look at Tesla's report and what it means for followers of the company.

Image source: Tesla.

Some new information from Tesla

Shareholders already had a pretty good idea that sales figures for Tesla's third quarter would be solid. After all, the company had already released record levels of vehicle production and deliveries in the third quarter. Many investors were therefore focused more on how that would translate into dollar figures and the impact of supply chain challenges and other factors on Tesla's profitability.

Those numbers looked quite strong. Automotive revenue grew to $12.06 billion, rising 58% year over year. Automotive gross margin climbed almost 3 percentage points to 30.5%, even though regulatory credits actually fell 30% from year-ago levels. As a result, total revenue came in at $13.76 billion.

Operating expenses were higher, but they rose at a slower pace than revenue, at 32% to $1.66 billion. Operating margin surged by more than 5 percentage points to 14.6%. That produced adjusted net income of $2.09 billion, more than doubling year over year, and adjusted earnings of $1.86 per share.

Beyond vehicles

Tesla also released information about its other businesses. The company deployed 83 megawatts in its solar business during the quarter, up 46% from year-ago levels. In the energy storage space, Tesla deployed almost 1.3 gigawatt-hours, up more than 70% from where it was in the third quarter of 2020. Tesla continued to build out its network of stores and service locations, as well as the fleet of mobile service vehicles to serve car owners.

Tesla also kept making progress with its charging network. The company now boasts more than 3,250 supercharger stations, up nearly 50% in the past 12 months, and it has almost 29,300 connectors available for customers.

High hopes

Tesla still has ambitious plans. It sees manufacturing capacity rising at a 50% annualized pace in the next several years, with ample cash to finance expansion efforts. The company is looking forward to its first Model Y production coming out from its facilities in Texas and Germany by the end of the year, and the resulting ramp-up in volume could help spur another leg higher for production and delivery figures.

For shareholders, hopes that Tesla stock would quickly jump to new highs above $900 per share didn't come to fruition, at least not immediately after the report. Yet with plenty of positive things to say about the business, Tesla seems to be positioning itself for the long-term success it will need to live up to the high expectations investors have for the automaker in the years ahead.