After its third-quarter net profit exceeded expectations, Wall Street went completely wild.
As of the close on October 25th, Eastern Time, Tesla's stock price on the US stock market rose by 21.9% to $260.48, with its total market value increasing by nearly $154.1 billion (approximately 1097 billion yuan) overnight.
As of the close on October 25th, there were only 11 companies on the A-share market with a market value of over one trillion yuan, among which the leading power battery company, Contemporary Amperex Technology Co., Limited (CATL), had a total market value of 1.08 trillion yuan. This means that Tesla's market value increased by the equivalent of one CATL in one night.
The surge in Tesla's stock price originated from the third-quarter financial report released after the market closed on October 24th, Eastern Time, which presented a net profit that exceeded market expectations. The financial report showed that in the third quarter of this year, Tesla's revenue reached $25.2 billion (approximately 179.6 billion yuan), a year-on-year increase of 8%; the GAAP (Generally Accepted Accounting Principles) net profit was $2.167 billion, a year-on-year increase of 17%, which exceeded market expectations; the gross margin also warmed up, increasing by about 2 percentage points year-on-year to 19.8%.
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Tesla's significant improvement in profitability in the third quarter of this year is related to the enhancement of its cost control capabilities on one hand, and on the other hand, it also benefits from the revenue from selling carbon credits. Tesla's per-vehicle cost in the third quarter reached a historical low of $35,100 (approximately 250,000 yuan). Moreover, Tesla's carbon credit revenue in the third quarter was the second-highest in history, at $739 million.
In the third quarter of this year, although the unit price of cars decreased by about $730 quarter-on-quarter, thanks to the decrease in the cost of raw materials such as power batteries, as well as the cost reduction brought about by layoffs, Tesla's automotive business gross margin (excluding the impact of carbon credits) also increased by 2.4% quarter-on-quarter to 17.1%.
However, after Tesla's third-quarter profits exceeded expectations, Wall Street institutions have shown a huge divergence in their views on its future stock price trend.
Wedbush analyst Dan Ives gave Tesla an outperform rating, setting a target price of $300 for the next 12 months, which is equivalent to an expected increase of more than 40% in Tesla's stock price compared to this Wednesday's closing price. He said, "Now that price cuts are completely in the past, we believe that for Wall Street, this is a key factor in proving Tesla's ability to improve profit margins in the coming years as it continues its AI and FSD (Full Self-Driving) transformation."
There are many Tesla bulls like Dan Ives, with Piper Sandler analyst Alexander Potter even giving a target price of $310. Last night's surge in Tesla's stock price also represented a carnival for both bulls and bears.
However, Tesla short seller, JPMorgan analyst Ryan Brinkman, believes that the market brought about by Tesla's third-quarter performance report is unsustainable. He said that Tesla's third-quarter profits and cash flow have improved, and several drivers behind these achievements are unsustainable. These include the so-called "selling carbon" revenue from selling carbon emission credits, as well as unusually high operating capital gains.Brinkman maintains his underweight rating on Tesla. He raised his target price for Tesla from $130 to $135, but the new target price is still nearly 37% lower than Tesla's closing price on Wednesday.
The main question for Tesla bears is whether concerns about Tesla's growth have truly been alleviated.
In the third quarter of this year, Tesla achieved a record high in single-quarter deliveries. Against the backdrop of optimistic sales, Tesla did not adjust the prices of its main models, Model 3/Y, in China and the United States in the third quarter. In Europe, due to the impact of increased tariffs, the price of Model 3 was raised by 1,500 euros.
However, if Tesla's order growth slows down, a new round of price cuts will be inevitable, which will also directly affect its profitability.
Li Yanwei, an expert from the China Automobile Circulation Association, told reporters from Yicai that in the third quarter of this year, the domestic price war did indeed ease, and the discount rate of car brands has been declining since July. However, as major car companies face sales pressure to meet their annual sales targets at the end of the year, the discount rate is expected to rise.
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