Tesla Inc. (TSLA, Financial), a major electric vehicle manufacturer, traded approximately 11% higher Thursday morning on strong Model 3 production guidance for the remainder of the year.
Company increases Model 3 production guidance for the upcoming quarter
The Palo Alto, California-based company said on Wednesday that it produced 7,000 Model 3, Model S and Model X vehicles during the final week of June. The production level represents a significant jump from the prior year according to CEO Elon Musk. Additionally, Musk said Tesla “repeated weekly production of approximately 5,000 Model 3 cars” multiple times during July and increased its production guidance to 6,000 Model 3 cars by late August.
Musk and Chief Financial Officer Deepak Ahuja underscored Tesla’s plan to address potential production constraints of GA3, the company’s main general assembly line. The CEO said in the earnings call that the production team “had to come up with a creative solution” for GA4, a simpler and more efficient production line aimed to accelerate the time required to reach the production goal of 5,000 cars per week. Musk also announced in July that Tesla plans to open a “Gigafactory” in Shanghai with an initial capacity of 250,000 vehicles per year.
Company improves gross margins and revenues from the prior quarter
Automotive revenues and gross margins increased 23% and 0.86% from the prior quarter: several factors, including “dramatic reductions in manufacturing costs,” resulted in higher gross margins for the Model 3, Model S and Model X.
GuruFocus lists one positive investing sign for Tesla; even though the company has a weak Piotroski F-score of 2 and experienced operating loss over the past three years, Tesla’s operating margin has improved approximately 13.60% per year over the past five years.
Stock rises on strong business outlook
Shares of Tesla increased approximately 11.30% from its previous close of $300.84 as the company provided a strong business outlook for the rest of the year.
Gurus with large stakes in Tesla include Ron Baron (Trades, Portfolio), Spiros Segalas (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Disclosure: No positions.
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