Tesla Earnings Were Great. Why the Stock Is Dropping.

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Stock in electric-vehicle pioneer

Tesla

was falling after the firm reported spectacular outcomes that largely beat Wall Street projections—and simply met rising investor expectations.

Shares had been off 0.9% in after-hours buying and selling after closing up about 0.1% in common buying and selling Wednesday. The

S&P 500
and

Dow Jones Industrial Average
each rose about 0.4%.

Tesla reported $1.86 in per-share earnings from about $13.eight billion in gross sales, beating Wall Street’s estimate for about $1.67 a share however lacking its forecast for $13.9 billion in gross sales. Earnings had been a file, and higher than anticipated, however analyst estimates have been rising—by about 20 cents a share—in current weeks after Tesla reported stronger than anticipated third-quarter unit deliveries on Oct. 2.

The firm delivered about 241,000 vehicles, roughly 10,000 to 15,000 greater than analysts projected. What’s extra, Tesla managed to ship about 40,000 extra automobiles than it did in the second quarter of 2021 regardless of the semiconductor shortage that has constrained world auto manufacturing.

Tesla’s sturdy deliveries had already boosted the inventory. Its shares had gained about 12% between the supply outcomes and Wednesday. The

Nasdaq Composite Index
is up about 4% over the identical span. Tesla inventory is up 31% over the previous three months.

The semiconductor and provide chain woes have led to greater prices for all auto makers. Gross revenue margins, nevertheless, got here in at virtually 27% in contrast with about 24% in the second quarter of 2021. Automotive gross revenue margins hit 30.5% despite the fact that the firm bought much less money from regulatory credit. Higher volumes out of current crops is a giant cause for bettering revenue margins.

Regulatory credit score gross sales are at all times a subject of dialogue for traders. Tesla is ready to promote regulatory credit as a result of it produces greater than its honest shares of zero-emission automobiles. Regulatory credit score gross sales have totaled $3.Four billion over the previous three years. Credit gross sales totaled $279 in the third quarter, the lowest degree since the fourth quarter of 2019.

Lower credit score gross sales, nevertheless, didn’t cease Tesla from reporting one other file quarterly working revenue. Reported working revenue topped $2 billion for the first time, up from $1.Three billion reported in the second quarter.

Overall, the consequence seems adequate to maintain shares nearly flat. Bulls might need hoped for a brand new excessive, eclipsing the $900.40 set again in January, however might need to attend a little bit longer to see a $9 in entrance of the inventory worth.

Management hosts a conference call starting at 5:30 Eastern time to debate outcomes. Investors and analysts can have questions on the new autonomous driving software program the firm simply rolled out, in addition to the outlook for manufacturing from Tesla’s two new amenities in Texas and Germany.

Write to Al Root at allen.root@dowjones.com