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Tesla’s stock drops over 5% in after-hours trading as 3Q earnings show mixed results

Tesla’s stock drops over 5% in after-hours trading as 3Q earnings show mixed results
[Photo: AdrianHancu / iStock]

After-hours trading indicates that investors are less than inspired by Tesla’s third quarter. Here’s the good news: Tesla beat on revenue estimates, with total sales of $2.98 billion. Analysts had estimated an average of $2.94 billion.

Earnings were in the negative. The company took a GAAP net loss of $3.70 per share, down from last quarter’s GAAP net loss of $2.04 per share.

But the big news is that Model 3 production is going to eat into production of Model S and X vehicles, forcing those numbers down 10% in the next quarter, which means less inventory of its high-end cars. Furthermore, because the company will be producing more Model 3s and fewer S and X cars, gross automotive margins are expected to drop 15% in Q4. Also this: The company spent $1.1 billion on capital expenditures this quarter and expects do roughly the same next quarter.

Tesla caveats all of this news by saying that the Model 3’s gross margin will break even by the end of the year. Also, operating costs will grow marginally if at all. After readjusting its manufacturing process to correct for problems that initially slowed production, the company is hoping to produce 5,000 Model 3s every week. Essentially, they expect many of their problems to be resolved by Q1 2018.

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