Tesla Soars to Its Biggest Gain in 11 Years, But is the EV Stock a Buy?

Shares of Tesla (TSLA) are up over 20% today, and on pace for their biggest daily gain in over a decade, after the electric vehicle (EV) manufacturer beat earnings estimates in Q3 of 2024. Moreover, Tesla CEO Elon Musk also provided optimistic guidance for vehicle deliveries in 2025. 

If the shares can hang onto today's massive intraday gains through the close, TSLA stock could lock in its biggest daily gain since May 2013, when the shares exploded 24% in one day as Wall Street reacted to the EV company's first-ever profitable quarter.

Let’s see how Tesla performed in the September quarter, and if the EV stock can continue to stage a comeback in the next 12 months. 

A Strong Performance in Q3 of 2024

Tesla reported revenue of $25.18 billion and adjusted earnings per share of $0.72 in Q3 of 2024, compared to estimates of $25.37 billion and $0.58, respectively. While Tesla comfortably beat earnings estimates, it missed the mark in terms of revenue. 

Tesla’s revenue rose by 8% year over year. While automotive sales were up 2% at $20 billion, its energy generation and storage revenue soared by 52% to $2.38 billion, and services sales grew by 29% to $2.79 billion. 

The critical driver of Tesla’s earnings beat was its gross margin expansion and focus on cost savings. It reported a gross margin of 19.8%, above estimates of 16.8%. Its gross margins stood at 17.9% in the year-ago quarter, almost two percentage points lower. 

It also reported a free cash flow of $2.74 billion, well above estimates of $1.61 billion. In Q3 of 2023, Tesla’s free cash flow stood at just $849 million. 

The automotive giant surprised Wall Street by disclosing that its Cybertruck was the third-best-selling fully electric vehicle in the U.S. While Tesla does not provide a breakout of sales by model, a report from Kelley Blue Book estimates the company sold over 16,000 Cybertrucks in Q3. Notably, Tesla confirmed that the vehicle turned gross margin positive in the September quarter. 

What's the 2024 Delivery Forecast for Tesla?

Earlier this month, Tesla reported Q3 vehicle deliveries below estimates, totaling 462,890 vehicles. Its deliveries rose 6% year over year, but disappointed investors, as Tesla continues to struggle with a challenging macro environment. In fact, in the first two quarters of 2024, its vehicle deliveries fell year over year due to sluggish demand and rising competition from China-based manufacturers such as Nio (NIO)and Byd (BYD). 

In the last 15 months, Tesla has offered several discounts and incentives to boost demand and spur its top line. Despite a tough start to the year, it expects to end 2024 with slight growth in vehicle deliveries.

What's Next For Tesla Stock?

During the Q3 earnings call, Tesla reiterated its plan to launch more affordable models next year, which should help it gain traction in several international markets. Due to lower-priced vehicles, Musk emphasized that vehicle growth should range between 20% and 30% in 2025. Comparatively, Wall Street projects vehicle deliveries in 2025 to surge by 15% to 2.04 million. 

Musk also claimed that all of Tesla’s future cars would be powered by self-driving or autonomous technology. Two weeks ago, Musk unveiled the company’s Cybercab concept and predicted that production of the fully autonomous vehicle will begin in 2027. 

Moreover, Musk stated that Tesla would produce two million Cybercabs every year at scale, and might even offer ride-hailing in its vehicles next year in certain U.S. states. 

What's the Forecast for TSLA on Wall Street?

Valued at $808 billion by market cap, Tesla stock still trades over 48% below all-time highs. Out of 37 analysts covering Tesla stock, the consensus rating is a middling “hold,” and the average target price is $205.88, about 20% below its current trading price. 

Analysts tracking TSLA stock expect adjusted earnings per share of $2.28 in 2024 and $3.03 in 2025, compared to $3.12 in 2023. So, priced at 83 times forward earnings, TSLA stock is quite expensive, given its continuing struggle with tepid sales and volatile margins. 

However, if the company successfully launches a fully autonomous vehicle within the expected timeline, TSLA could trade at a higher multiple. 

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On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.