Tesla's third-quarter results were lukewarm, but CEO Elon Musk says vehicle demand is exceeding production. A Motley Fool analyst sees an EV rebound and a possible SpaceX merger as reasons to view the stock as a buy.
Tesla CEO Elon Musk said demand for the company's vehicles was "growing rapidly" and significantly exceeding production. The statement came even though the Motley Fool's Geoffrey Seiler described the third-quarter numbers as unremarkable.
Full Self-Driving drives vehicle demand
Seiler writes that the biggest driver of demand is Tesla's Full Self-Driving (Supervised) offering. Over 75% of North American deliveries now include a paid FSD subscription. Tesla has over 1.7 million paid FSD customers globally, half of whom are on subscriptions.
Tesla is also pushing to get FSD approved in additional markets, and it is hopeful for a European Union approval in the coming months. Separately, it has started production of the Tesla Semi truck and expects to manufacture 5 million of these trucks annually by 2030.
Q3 deliveries fall while FSD subscriptions climb
Tesla's automobile deliveries in Q3 fell 5%, while total production rose 4%. Auto revenue dropped 3% to $20.56 billion. Active FSD subscriptions rose 67% to 1.74 million users, but high-gross margin regulatory credit revenue plunged by 73% to $113 million.
Overall, revenue was little changed year over year at $28 billion. Energy generation and storage revenue fell 16% to $2.9 billion, and service revenue rose 33% to $4.6 billion. Adjusted earnings per share slipped 4% to $0.48, topping analysts' consensus of $0.43.
Robotaxi, Optimus and a possible SpaceX merger
Tesla says its Cybercab robotaxi uses 50% fewer parts than other Tesla vehicles, and the company is looking to bring operating costs down to $0.30 per paid robotaxi mile. It has also started what Musk called early production of Optimus humanoid robots. The company plans to ramp up production to 20,000 units per week by the end of next year.
Musk addressed a possible SpaceX-Tesla merger on SpaceX's recent earnings call, saying he thought it would be a good idea. He also said he is not part of any merger discussions. The two companies have formed special committees to discuss the idea, and 50% of shareholders would need to approve any merger.
Seiler notes that Tesla stock has bounced back from its summer lows but is still down double digits on the year and up just over 25% over the past five years.
In his view, the merger speculation likely helps put a floor on the stock, and progress on the Cybercab, Tesla Semi and Optimus should provide optimism.
Source: The Motley Fool
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