/Tesla shares are soaring after Elon Musk delivers on profit promise

Tesla shares are soaring after Elon Musk delivers on profit promise

Elon Musk’s repeated promises of profit have been met with widespread skepticism from investors and analysts, but on Wednesday, the Tesla Inc. CEO delivered.

When the Street was expecting Tesla to post another massive net loss — this time to the tune of $253 million — the electric car maker surprised by posting a $342 million profit. The company’s stock, which has spent a majority of 2019 trending downward from its peak of US$379.49 in January, immediately jumped 20 per cent in after hours trading on Wednesday. In early trading on Thursday morning, the stock is still up more than 16 per cent.

Profits have been rare for the California-based company since its market debut in 2010. Previously, Tesla had only been profitable four times in its history as a publicly-traded company, most recently in back-to-back quarters in 2018. Musk’s company also posted profits once in 2016 and for one other quarter in 2013.

Tesla Inc’s gigafactory in Shanghai, China.

Reuters/Aly Song

Tesla reached profit in a less than conventional method. For the first time in five years, the electric carmaker did not increase year-over-year revenue, which came in at US$6.3 billion. That’s down from the previous quarter and US$520 million less than the third quarter of 2018. But at a time when the company is continuing its aggressive expansion into China, it managed to be more efficient and offset lower revenue with lower manufacturing and capital expenditures.

The company was able to break ground on its Gigafactory Shanghai facility in January of this year and build it in 10 months. Musk described the factory as being a “template for future growth.” It cost 65 per cent less than Tesla’s Model 3 production line in the U.S. and could eventually help triple the company’s output, he said.

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