Why Tesla Stock Can Ride Even Higher After Q3 Earnings

Tesla TSLA shares have soared nearly +20% since its Q3 report in late October and the rally could continue.Sporting a Zacks Rank #1 (Strong Buy), Tesla’s stock is gaining momentum due to positive earnings estimate revisions.With analysts starting to increase their earnings outlook for the EV leader, investor sentiment has also turned a corner thanks to the success of Tesla’s Cybertruck.Elon Musk’s bullish outlook for fiscal 2025 has played a role in Tesla’s recent rally as well. To that point, the Tesla boss expects the company’s vehicle growth to be between 20%-30% next year.Furthermore, Tesla has benefited from regulatory credits which have helped boost its profit margins while seeing impressive expansion in its energy storage business. Image Source: Zacks Investment Research Cybertruck Success & FSD Production To the delight of investors, Tesla said its Cybertruck production increased sequentially and achieved a positive gross margin for the first time during Q3. Even better, Tesla stated the Cybertruck was the third best-selling EV in the U.S. behind its Model Y and Model 3 series.With its artificial intelligence prospects in the works, Tesla increased its AI compute training by 75% last quarter. Tesla’s AI software and hardware are being implemented to improve the safety and comfort of its autonomous or Full Self-Driving (FSD) features.Tesla reported over 2 billion miles driven cumulatively on supervised FSD in Q3. Continuing to increase its autonomous vehicle capacity, Tesla’s FSD-supervised system brought in $326 million in revenue which was largely attributed to the feature being added in the Cybertruck.Image Source: Tesla Investor Relations Rising EPS Estimates Fueling the post-earnings rally in Tesla’s stock was its increased profitability with Q3 net income rising 17% to $2.17 billion versus $1.85 billion in the comparative quarter.This led to adjusted earnings of $0.72 per share compared to EPS of $0.66 in Q3 2023. Boosting Tesla’s net earnings was $739 million in automotive regulatory credits. The regulatory credits were part of the Inflation Reduction Act which includes provisions for zero-emission vehicle (ZEV) manufacturers.Notably, earnings estimate revisions for Tesla’s fiscal 2024 have spiked 8% in the last 30 days from projections of $2.25 a share to $2.45 per share. Plus, FY25 EPS estimates are up 4% over the last month with forecasts now at $3.18 per share.Image Source: Zacks Investment Research Regulatory Credits & Energy StoragePiggybacking on Tesla’s regulatory benefits, the EV leader remains in a prime position to earn a profit by selling its credits as an electric vehicle manufacturer to traditional automakers that purchase them to comply with emissions regulations.Just as intriguing is the growth of Tesla Energy. Revolving around solar battery installations for homes and storage facilities, Tesla’s energy revenue skyrocketed 52% in Q3 to $2.4 billion compared to $1.55 billion in the prior-year quarter. Tesla’s Record Cash Flow Indicative of Tesla’s strong management, it’s also noteworthy that the company reached a record for Q3 free cash flow at $2.7 billion as shown in the quarterly chart below. Tesla’s operating cash flow also hit a peak of $6.3 billion.Image Source: Zacks Investment Research Bottom Line It’s easy to see how Tesla’s business operations are starting to compel investors again. That said, it would be no surprise if Tesla’s stock continues to drift higher given the trend of positive earnings estimate revisions which is starting to correlate with Elon Musk's bullish outlook for FY25.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tesla, Inc. (TSLA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks