Tesla Q3 - Poised for Growth

On Wednesday night Tesla reported numbers that smashed expectations. Revenues came in at $8.8 billion for the quarter, up 39% from last year. Profits were $874 million, up 156%, and higher than the $593 million expected. This is the 5th quarter in a row that the company has made a profit.

The number that really struck me was their cash on hand. Tesla now has $14.5 billion in cash on its balance sheet. For a company that not so long ago was a few weeks away from running out of money, this is an amazing turnaround. The chances of them going bust is now very small.

The question is what valuation to put on Tesla. Should it be worth around $400 billion, its current market capitalisation? Some very clever people think yes and some other very clever people think no. I would not bet against Elon Musk.

Tesla is still committed to its target of delivering 500 000 vehicles this year. For 2021, they have the potential to increase that number to 750 000. It is amazing to see how rapidly they have been able to scale up production.

Their energy division is also very exciting. Musk says that this part of the business is 'poised for growth', and in time it will be as big as the vehicle division. The number of solar roof deployments have tripled. The overall momentum will continue.

Musk also says that Tesla cars need to become more affordable. As economies of scale kick in Tesla will reduce the price of their vehicles. Lower prices will ensure continued demand. Amazingly, Tesla plans to drop prices but still expand their profit margins. It shows you how quickly the electric vehicle market is evolving.

Owning Tesla shares is a wild ride. We will continue to hold the stock for brave clients who are not afraid of a little volatility.