The electric car maker turned a corner with a US$143mln net profit in the third quarter, following a loss of $1.1bn for the first half of 2019.
Positive free cash flow of US$371mln left Tesla it with a bigger cash balance of US$5.3bn at the end of September.
Earnings per share of US$1.86 were a huge beat versus a wide range of Wall Street forecasts, where the most optimistic was for EPS of US$0.34 and the bears were looking for a loss per share of US$1.25.
Revenues of $6.3bn were down 8% in the quarter, not far off the analyst consensus of $6.3bn according to Refinitiv, with delivery numbers having disappointed at the start of the month.
“Operating expenses are at the lowest level since Model 3 production started,” Tesla said. “As a result, we returned to GAAP profitability in Q3 while generating positive free cash flow. This was possible by removing substantial cost from our business.”
Tesla stock were up 19% in pre-market trading on Thursday at $302.67
Chief executive Elon Musk, who said in July that Tesla would turn a profit by the end of 2019, expects the Shanghai gigafactory to launch the Model Y sports utility vehicle (SUV) by next summer.
Musk said on a call with reporters that he expects the Model Y “will outsell the X, S, and 3 combined”.
The company said in the statement that it was “positioned to accelerate our growth further” through Gigafactory Shanghai, Model Y and by increasing build rates on existing production lines.
There will be a gradual release of nearly US$500mln of accumulated deferred revenue tied to Autopilot and the full self driving features.
“We already knew total car deliveries had increased some 16% year-on-year, but driven by newer, cheaper Model 3s, with premium Model S and X sales actually down,” said Nicholas Hyett, an analyst at Hargreaves Lansdown.
“That raised questions about how profitable the sales would prove. While sales and revenues are down year-on-year, it turns out the market was overcautious.”
He said the cash flow was the most important factor, given the speed of expansion will mean Tesla faces significant demands on its cash pile, and showed the company was now self-funding.
“We would voice a word of caution however,” Hyett added. “The price of Teslas may be lower than in the past, but they’re still a big ticket, comparatively premium product.
“That’s not a category that holds up well in a downturn – and the economic landscape is hardly rosy. So while the group’s weathered the storm so far, and is doing a good job of improving efficiency too, it’s not out of the woods yet.”