Skip to Content
Stock Analyst Update

Tesla's Surprise Profit Blows Away Consensus

Tesla is a volatile name and fair value estimate changes may be frequent as its story changes.


Tesla (TSLA) reported third-quarter results with a surprise profit that blew away consensus. Adjusted diluted EPS of $1.86 easily beat consensus of a $0.42 loss and Tesla had a GAAP profit of $0.78 per share. GAAP free cash flow of $371 million declined from the prior year quarter’s figure of $881 million but the company finished the quarter with a comfortable cash figure of $5.3 billion. Revenue declined year over year by 7.6% to roughly meet consensus of $6.33 billion. Total deliveries rose 16% year over year to 97,186 and by 1.9% sequentially. Model 3 should lead growth for the next several quarters until the Model Y crossover is at decent production volumes. The sedan’s deliveries grew sequentially by 2.7% but rose by about 42% year over year, while Model S and X combined deliveries fell 36.9% year over year. The company is “highly confident” its 2019 total vehicle deliveries will exceed 360,000 and we agree but the top end of prior delivery guidance of 400,000 was not mentioned. The stock rose 20% after hours on Oct. 23 due to the EPS beat and Tesla saying the Model Y will now start production next summer instead of in late 2020.

Although the S & X are higher priced than the Model 3 and Model Y, we agree with CEO Elon Musk that the 3 and the Y are the future of Tesla as these vehicles will bring the volume it needs to get more scale. Given Americans' love of crossovers, it is the largest U.S. vehicle segment at over 40% of new vehicle sales, and other vehicles coming such as a pickup truck in a few years, we are substantially raising our vehicle delivery projections through 2028 which causes our fair value estimate to rise 41% to $326. We remain concerned about Tesla’s debt load so if free cash flow becomes insufficient to service debt, we may raise our weighted average cost of capital. All else constant, that move would lower our fair value estimate to as low as $206. Tesla is a volatile name and fair value estimate changes may be frequent as its story changes.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

David Whiston does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.