Tesla's first quarterly earnings call on Wednesday night without CEO Elon Musk (by his own design) was as boring as watching a Pinto head down a quarter mile track for time.
But Wall Street pros say that the lack of Musk's presence didn't really matter, the more important thing is that Tesla (TSLA) continues to squeeze out more profits from each vehicle it makes.
"Tesla reported particularly strong 3Q21 operating performance, delivering its highest auto gross margins since Model 3 was introduced, despite minimal S+X volume and higher supply chain costs, and impressive GAAP operating margin of 14.6% (18.4% ex-SBC), surpassing even its long-term company targets. We believe this reflects relentless efforts towards vehicle cost reductions, and operational flexibility in a challenging industry environment," said Deutsche Bank analyst Emmanuel Rosner in a research note to clients.
The EV maker's profits topped expectations for the third quarter, powered by record deliveries. Third-quarter deliveries were driven by the more affordable Model 3 and Model Y vehicles. Together, these models comprised over 232,000 of the overall quarterly deliveries. But, quarterly sales came in short of consensus estimates as the top line was somewhat hindered by the semiconductor shortage.
Despite the revenue shortfall, Tesla widened its operating margin to 14.6% in the third quarter, versus 11.0% in the second quarter and 9.2% in the same period last year.
#Tesla auto gross profit margins: last 15 quarters
1Q18: 20.00% $TSLA
— Brian Sozzi (@BrianSozzi) October 20, 2021
Tesla bulls on the Street quickly regained the narrative on Thursday after the stock initially came under pressure on the revenue miss. The stock rose 3% in afternoon trading in large part because of the impressive margin showing for the company.
Said Morgan Stanley auto analyst Adam Jonas, "Annualized 3Q EBITDA is approaching $13 billion… getting into GM and Ford territory magnitude, despite a fraction of the revenues. What’s particularly notable is Tesla’s margin performance despite significant cost inflation and a 6% reduction in ASPs [average selling prices] year-over-year."
One analyst was so jazzed up by Tesla's margin performance and what it may mean for future profits, they think the stock has the potential to nearly double from current levels around $892.
"While maintaining our Outperform rating we are raising our price target on Tesla from $1,000 to $1,100 as the green tidal wave hits its next gear into 2022 with Tesla leading the charge. Tesla has a supply issue which will soon be resolved with EV demand robust globally and the long awaited margin story now taking hold. Our long term bull case is now $1,500 vs. our prior bull case of $1,300," opined Wedbush analyst Dan Ives.
Yahoo Finance's Emily McCormick contributed to this story.