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Tesla beats on earnings but comes up short on revenue, stock falls in late trading

Tesla Inc. produced less revenue than expected despite record deliveries in the third quarter, but earnings beat analysts’ estimates.

Tesla TSLA,
+ 0.84%
on Wednesday reported third-quarter earnings of $ 3.29 billion, or 95 cents a share, on sales of $ 21.45 billion, up from $ 13.76 billion a year ago. After adjusting for stock-based compensation, the electric-vehicle manufacturer reported earnings of $ 1.05 a share, up from 62 cents a share a year ago.

Analysts on average were expecting adjusted earnings of $ 1 a share on sales of $ 21.98 billion, according to FactSet. Tesla shares declined about 5% in after-hours trading immediately following the release of the results, after closing with a 0.8% increase to $ 222.04 in the regular trading session.

Tesla shares have fallen more than 37% so far this year, a harder descent than the 22% decline of the S&P 500 index SPX,
-0.67%,
after years of outsize gains. Pundits have put forth a variety of reasons for the downturn, including increasing competition in the EV market, negative press around Tesla’s full-self-driving claims and actual performance, and Chief Executive Elon Musk’s attention being diverted to his attempt to acquire Twitter Inc. TWTR,
+ 0.10%.

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Tesla delivered a record number of cars in the third quarter, but still missed analysts ‘expectations and made it more difficult to hit executives’ target for the year of an increase of more than 50% in vehicle deliveries. In a preview of the report Tuesday, Wedbush Securities analyst Daniel Ives said that “the Street is starting to worry that the bloom is coming off the rose in the Tesla story with delivery shortfalls front and center.”

“Between logistical issues in China, supply-chain problems, FSD black-eye moments, the Musk Twitter fiasco and EV competition increasing across the board, there is growing pressure on Musk & Co. to prove themselves,” Ives wrote, while openly wondering if Musk will stick with the annual target for delivery growth, which would require nearly 500,000 cars to be delivered in the fourth quarter.

In a shareholder deck shared Wednesday afternoon, Tesla executives did not change the outlook they provided in the previous quarter, except for some product updates. Musk and other executives are expected to hold a conference call at 5:30 pm Eastern to discuss the results in more detail.

Tesla’s automotive gross margin, which declined in the second quarter despite price increases that Musk called “embarrassing,” were the same sequentially at 27.9%. Operating margin increased both sequentially and year-over-year, however, to 17.2% from 14.6% both in the third quarter a year ago and the previous quarter.

Earnings preview: Do record Tesla deliveries mask a demand problem?

In their communications with investors on Wednesday, Tesla executives disclosed that they will change the process for one of their most challenging tasks of late – transporting cars – in hopes of bringing costs down.

“We are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure. As a result, we began transitioning to a smoother delivery pace, leading to more vehicles in transit at the end of the quarter, ”the company’s shareholder deck reads. “We expect that smoothing our outbound logistics throughout the quarter will improve cost per vehicle.”

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