Tesla Inc (NASDAQ: TSLA) stock rally gives investors respite

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Tesla Inc (NASDAQ: TSLA) stock surged over 15% on 24th October, 2019 (As of  11:31 am GMT-4; Source: Google finance) after the company posted profit for the third quarter of FY 19 and being ahead of schedule with a new factory in Shanghai. TSLA is ahead of schedule on its long-awaited Model Y crossover, which is now projected to get launched by next summer. The company is also planning to make a limited run of its Tesla Semi truck next year, and intends to soon announce the location of its European Gigafactory, where the company has target to begin making electric vehicles in 2021.

Moreover, the company’s automotive gross margin has expanded sequentially to 22.8% and over 20% excluding regulatory credits due to improvements through higher production volumes on Model S, Model X and Model 3, enabling better fixed cost absorption. TSLA’s capex spend increased, driven mainly by Gigafactory Shanghai and Model Y spending. Further, the company experienced growing order rates in all markets, with current quarter orders exceeding those of the past three months. Tesla currently aims to produce approximately 1,000 Model 3 cars a week at the new Chinese factory by the end of this year, however it is unclear when it will meet year-end production targets due to uncertainties around orders, labour and suppliers.

TSLA in the third quarter of FY 19 has reported the adjusted earnings per share of $1.86, beating the analysts’ estimates for the adjusted loss per share of 42 cents, according to Refinitiv consensus estimates. The earnings improved partly due to the company recognizing about $30 million of deferred revenue based on a controversial addition to its suite of drive-assistance features known as Autopilot. The company had reported 8 percent fall the adjusted revenue to $6.3 billion in the third quarter of FY 19, slightly missing the analysts’ estimates for revenue of $6.33 billion.

Meanwhile, during the third quarter, the company came up with over-the-air software updates, that also includes a controversial Smart Summon feature, that lets some Tesla drivers use an app to remotely call and control their cars. The company is focusing on the margins as TSLA launched new Autopilot software upgrades which enabled the company to post deferred revenues. At the end of June, the company  expected to recognize $567 million of deferred revenue in the next one year. The company now anticipates the release of almost $500 million related to the rollout of Autopilot and “Full Self Driving” features.

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