Tesla's (TSLA +3.75%) third-quarter earnings dropped last week, giving investors a look at the hard numbers and a chance to see beyond the hype. With bulls and bears constantly sparring over the stock's true value, these results offer some clarity.
1.Tesla sales growth returns after three-quarter decline
Considering the ink spilled over the last six months over Tesla's declining sales in markets across the globe, maybe the most eye-catching number is Tesla's top-line sales, which grew 11.6% year over year (YOY). That's the first time this year that it's improved over the same period in 2024.
It's also the first time since Q2 2023 that Tesla's year-over-year growth topped 10%. Yet this apparent win comes with an asterisk. The company likely saw a pretty significant boost from U.S. consumers rushing to make use of the electric vehicle (EV) tax credit before it expired.
NASDAQ: TSLA
Key Data Points
2.Tesla earnings drop 37% despite revenue growth
The company's top-line growth came in part at the expense of its bottom line; increased competition forced Tesla to lower its prices, eating into its margins. This, rising administrative costs, and a $400 million hit from tariffs, led to a steep earnings decline. Tesla's net income fell by nearly $1 billion, and its diluted earnings per share (EPS) plunged 37% YOY.
3.Tesla energy-storage revenue surges 50% in Q3
The bright spot came from its energy-storage segment, where revenue surged nearly 50%. The segment has delivered consistent double-digit growth for several quarters, driven by soaring demand for Tesla's advanced battery technology.
The incredible growth should continue as the company pushes its new "Megablock" -- an energy-storage product that combines four of its Megapack 3s aimed at large-scale utility customers.
4.Musk's robot vision comes into focus
While EVs and energy-storage products are where the company actually generates income, Tesla's popularity with investors has a lot more to do with the future and Elon Musk's vision for it; full self-driving (FSD) technology, robotaxis, and personal robots are why the company has amassed a market capitalization of nearly $1.5 trillion, not its car sales.
In the earnings call, Musk said that Tesla's robotaxis operating in Austin, Texas would have no safety monitors by the end of this year. He acknowledged the stakes, saying, "We are being very cautious with deployment...even one accident will be front page news."
Beyond robotaxis, investors have turned their attention to Tesla's Optimus robots, which Musk positions as a major driver of future revenue growth. The company says it is preparing for "volume production" for the humanoid robots, installing first-generation assembly lines.
The robots took center stage during discussions of Musk's controversial, $1 trillion compensation package, which shareholders will vote on at Tesla's Nov. 6 annual meeting. The board warns that Musk may leave if the package is rejected, while the "Take Back Tesla" coalition opposes it.
On the earnings call, Musk advocated for the package, saying the additional shares would ensure he maintains control of the company: "I don't feel comfortable building that robot army if I don't have at least a strong influence."
5.Tesla stock valuation disconnect
Tesla's Q3 earnings revealed interesting data points but nothing that would change minds. Whether Tesla's sales recovery represents a genuine reversal or just a tax-credit-driven blip will be made much clearer next quarter.
And while grand visions of the future are exciting, the reality is that at present, Tesla is not a robot company; it is an EV and battery company. My verdict remains unchanged: Tesla is significantly overvalued. The growth already priced into the stock is extreme.
Its financial performance over recent years comes nowhere close to supporting the stock price, and I don't believe the company can deliver the future it is promising.
