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Will Q3 results drive further growth in Tesla's share price?

Tesla share price: The outside of a Tesla factory

Tesla’s [NASDAQ: TSLA] share price has risen by more than 30% since the company reported its Q2 results on 26 July, and the signs are that the electric vehicle maker continued to perform well in Q3. With Tesla set to announce its Q3 results after US markets close on Wednesday 20 October, we look at the company’s recent performance and consider what might be next for its share price.

Tesla share price has doubled in the last year, but remains below its peak

Tesla’s share price is up 122% from a 52-week low of $379.11 on 30 October 2020, though it hasn’t been a smooth ascent. The company’s stock climbed to a record high of $900.40 in intraday trading on 25 January 2021, before shedding some of those gains over the subsequent four months, as sales in China fell amid criticism of Tesla’s manufacturing quality from Chinese state-controlled media. However, since then, Tesla’s share price has rebounded – the stock is up more than 50% since 19 May, after overcoming a dip in August. And there may be potential for further gains, with the stock currently trading approximately 5% below the record high it reached in January. Tesla’s current market capitalisation of more than $850bn makes it by far the most valuable car maker in the world by market cap, way ahead of second-placed Toyota at close to $300bn.

Could growth in vehicle deliveries in Q3 fuel another strong quarter? 

Tesla’s Q3 earnings are expected to come in at $1.56 a share, up from $1.45 a share in the previous quarter, as the company looks to have built on its strong performance in Q2. Tesla’s Q2 numbers were notable for several reasons. The headline news was that the company posted a record profit of $1.14bn for the quarter, the first time it had surpassed $1bn. Revenue was $11.96bn, versus an expected $11.36bn. Another key takeaway was that Tesla made a profit from car sales for the first time, despite rising supply chain costs and a reduction in revenue from regulatory credits, which decreased to $354m from $518m in Q1. These results saw Tesla comfortably exceed expected earnings of $0.97 a share. The company reported positive cash flow of $619m, while operating margins rose to 11% from 5.7% in Q1. The balance sheet also showed a $23m impairment related to the value of Tesla’s bitcoin holdings. 

Since Tesla reported its Q2 results on 26 July, its share price has risen steadily on expectations that vehicle deliveries will continue to increase. The company delivered 185,000 vehicles in Q1 and 201,000 vehicles in Q2, the latter figure marking an increase of 121% on the year-ago quarter. Tesla has already reported that it delivered 241,000 vehicles in Q3, a new record, with its Model 3 and Model Y cars accounting for around 96% of that figure. Growth in deliveries, which was achieved despite ongoing shortages of semiconductor chips and other supply chain issues, was supported by strong performance in China, where its Shanghai Gigafactory delivered record sales. With new manufacturing capacity due to come online in the next few months, as facilities in Austin and Berlin get up and running, deliveries seem set to increase further. 

Tesla’s Q3 results could underscore growth potential

With Tesla’s Q3 delivery numbers already known, the company seems poised to report another strong quarter of growth. We’ll be paying close attention to how the Tesla share price reacts after the company announces its Q3 earnings at 5:30pm EST (10:30pm in the UK) on Wednesday 20 October. 

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