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Tesla Makes Andrew Left Look Like a Genius By Posting a Record Quarterly Profit

By NexChange
Financial Services

A day after Andrew Left, prominent short-seller and legal thorn in Elon Musk’s side,  made a stunning reversal of opinion by announcing that his Citron Research is now going long on Tesla, the carmaker rewarded his sudden flip-flop by surprising Wall Street and posting a record profit for the third quarter.

Tesla posted a 3Q profit of roughly $312 million, which is about $1.75 a share, “beating the average estimate for a loss of 99 cents by analysts surveyed by FactSet,” as the Wall Street Journal notes. In the year-ago quarter, the Journal also points out, Tesla suffered a a loss of $619.4 million, or about $3.70 a share.

More per the Journal:

The maker of the Model S sedan and Model X sport-utility vehicle, which typically sell for around $100,000, hasn’t reported a profit since the third quarter of 2016 when, helped by the sale emission tax credits other auto makers, it made a record $22 million.

Tesla’s free cash flow rose to $881 million compared with a negative $740 million during the second quarter. Analysts had expected positive free cash flow of $191 million during the third quarter. Tesla’s cash on hand improved to $3 billion at the end of the quarter compared with $2.2 billion at the end of June.

The company said that its Model 3 vehicle “was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume.” Its weekly Model 3 production through 3Q (excluding planned shutdowns) averaged about 4,300 units per week
“Model 3 is attracting customers of both premium and non-premium brands, making it a truly mainstream product,” the company said in a statement.
Per Tesla’s 3Q update:
In Q3, we delivered 56,065 Model 3s to customers. Based on trade-ins received from customers since the start of Model 3 production, more than half of those trade-in vehicles were priced below $35,000 when new. It is clear that customers are trading up their relatively cheaper vehicles to buy a Model 3 even though there is not yet a leasing option and the Q3 starting price of a Model 3 was $49,000. This leads us to believe that the total market potential for Model 3 is larger than just the premium sedan market. Additionally, we are working hard to bring down the price of Model 3 to $35,000. We have taken a step forward by recently introducing a medium range version that has a 260-mile EPA estimated range and a starting price of $46,000. Better than expected Model 3 cost reduction is allowing us to bring more affordable options to the market sooner.
We stopped taking Model 3 reservations in North America in early July 2018 when we moved to a direct order system. Of the 455,000 net reservations that we reported in August 2017, less than 20% have cancelled. We are expecting most of the remaining reservations to gradually convert to orders as we launch more versions of Model 3, introduce other financing options, and begin sales outside North America.
Left, who sued Musk and Tesla for alleged “price manipulation” after Musk notoriously tweeted his desire to take Tesla private, declared in a blog post that “Tesla is destroying the competition,” which is why Citron is now long on the company.

“The most challenging part of being a short seller is to constantly check your thesis to make sure nothing has changed,” Left wrote.. “You must let all predispositions and prejudices disappear and stay focused on only the facts.”

Left called the Model 3 “a proven hit” and that as the media “focused on Elon Musk’s eccentric, outlandish and at times offensive behavior, it has failed to notice the legitimate disruption of the auto industry that is currently being DOMINATED by Tesla.”

He added that it “now seems obvious, but Tesla appears to be the only company that can actually produce and sell electric cars.”

Regardless of the change on his investment position, Left noted that he is still suing Musk and Tesla.

Photo: Model 3 via Tesla

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