Tesla investors cheer best-ever quarter but analysts aren't so sure

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Continues to question the USA demand for the Model 3 in a post-tax credit environment.

Chief Executive Elon Musk may post a long-promised profit when Tesla Inc reports third-quarter results later on Wednesday, as production of the Model 3 electric sedan takes off, but investors will want to know if such results are sustainable. About this on their pages, writes the news Agency AP, reports to our website.

Tesla has already been forced to build a production line in a tent at its California factory to expand Model 3 production.

Earlier this year, Musk pledged to step up production of the Model 3 to 5,000 vehicles per week by the end of the second quarter.

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Management walked back its 10,000/week production target and instead focused on hitting 7,000, which could lead to lower production estimates from the Bulls for 2019-2020.

The company on Wednesday reported an "historic" profitable quarter driven by demand for the mass-market Model 3.

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Tesla has battled widespread scrutiny, following Musk's August 7 tweet that he was planning to take Tesla private and had "funding secured".

A Tesla spokesman said that the company was transparent about the difficulty of increasing production of the Model 3.

Tesla has denied the claims in the lawsuit, saying it disclosed production bottlenecks once they were identified, and citing Musk's public statements that the company was undergoing a period of "production hell" in 2017. Tesla showed earnings of $311.5 million during the three months ending in September, swinging from a loss of $619 million at the same time a year ago.

Shares of Tesla Inc have risen 1.13% so far in 2018 compared with a 9.69% gain for the benchmark index, Nasdaq 100 (NDX). Tesla's working capital and cash position improved in 3Q18, softening near term liquidity concerns, which should allow debt holders with shorter maturities to breathe a sigh of relief.

"The Tesla investment case is about growth, not free cash generation, so we expect cash to be invested in growth and support current leverage if Tesla demonstrates sustainably positive free cash flow". Says customers waiting for the $35,000 (Dh128,530) version of the Model 3 are subject to high degrees of price sensitivity relative to customers in the mid-sized premium sedan market.

"We note the competitive market will be steeper when Tesla launches in Europe given the bevy of new introductions from European OEMs".

"We continue to question the USA demand for the Model 3 in a post tax credit environment", he said. Production numbers fell within the range Tesla had forecasted in the previous quarter.

Analysts thought Tesla was in trouble earlier this year because the company had been burning nearly a billion dollars a quarter in late 2017 and early 2018.

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