Tesla’s Profitability Promises are Due for Delivery

Hilary Kramer

Tesla’s profitability promises by its CEO Elon Musk are supposed to become reality when the company reports its third-quarter earnings in early November, but the quality and sustainability of any improved financial performance will be assessed closely by analysts and investors alike.

Bold and prone to make controversial tweets, Musk, as well as his employees, exerted great effort to fulfill Tesla’s profitability promises in the third quarter by stepping up car production to 80,142 and deliveries to 83,500 with an emphasis on “higher-priced models” during that key three-month period. One auto industry analyst who rates the shares of Tesla Inc. (NASDAQ:TSLA) as overpriced, but is forecasting the company will turn a third-quarter profit is Barclays’ Brian A. Johnson, whose $210 a share price target for the auto maker is well below its closing price of $276.59 on Oct. 16, when it jumped $17 a share, or 6.55 percent.

The stock rose after a judge on Oct. 6 approved a previously announced settlement between Musk and the Securities and Exchange Commission (SEC). The SEC sued Musk Sept. 27 for “false and misleading” tweets, before agreeing to a settlement announced on Saturday, Sept. 29, that barred the CEO from serving as the company’s chairman for the next three years and required him and Tesla each to pay a $20 fine to compensate investors who had been “harmed” by his statements.

Musk received flak for a series of Aug. 7 tweets about taking Tesla private in a multi-billion transaction at $420 a share for a “substantial premium” of more than 20 percent above the company’s then-current share price. After the settlement, Musk sarcastically mocked the SEC with a tweet on Oct. 4 that called the agency the “Shortseller Enrichment Commission,” added facetiously the agency is doing “incredible work’ and described his new nickname for it as “so on point.”

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Paul Dykewicz, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz.

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