Short-sellers fled after Tesla (NASDAQ:TSLA) reported a small profit in the quarter. Bears called the risk of bankruptcy and cash flow problems too soon. And after the strong delivery numbers, bears will have to re-think their bet against the company.
In the third quarter, Tesla reported GAAP profits and generating strong free cash flow. Record deliveries and an eye on costs led to the earnings beat. Now that Tesla 3 production is enjoying the lowest operating costs, the company may turn its focus on the Giga Factory opening in Shanghai and the Model Y launch.
Tesla moved its Model Y launch timeline from full 2020 to summer 2020, allaying fears of delays. The company forecast the cross-over SUV will outsell Model 3, X, and S combined. That is a bold forecast but achievable. For years, demand for cross-overs took over that of luxury and sedan cars in the automotive market. And with stronger demand and sales ahead, investors may confidently expect consistent profits each quarter.
Potential Risks
Nio (NYSE:NIO) has cash flow problems but has Tencent’s support. It could limit Tesla’s sales growth in the Chinese region. The ongoing trade war between the U.S. and China may disrupt demand for global automobiles, hurting Tesla sales in the process.
Your Takeaway
Tesla’s over 30% gain in the last month suggests investors should wait for a pullback before starting a position in the stock.
Tech Insider
