Markets

Tesla shares pop the most in 6 years after earnings show it's building cash, boosting margins

Key Points
  • Tesla's stock had its best single day of trading since May 2013.
  • The electric automaker turned in an unexpectedly profitable third-quarter and better than anticipated progress toward getting its Shanghai factory operational.
  • "Skeptics had legitimate concerns in the past, but Tesla is now building cash, winning market share, and boosting margins," Piper Jaffray says.
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Tesla's stock popped big when trading began on Thursday, after the electric automaker turned in an unexpectedly profitable third-quarter and better than anticipated progress toward getting its Shanghai factory operational.

"Skeptics had legitimate concerns in the past, but Tesla is now building cash, winning market share, and boosting margins - all while preparing to launch products in untapped segments and regions," Piper Jaffray analyst Alexander Potter said in a note to investors after the results. Piper Jaffray has an overweight price target on Tesla with a $372 a share price target.

Wall Street analysts were largely surprised by Tesla's results, showing more optimism about the company's future than after previous quarterly reports.

Shares of Tesla finished trading up 17.7%, closing at $299.68 a share, clinching the stock's best single day of trading since May 2013. 

Opening above $300, Tesla shares returned to levels not seen since February this year. However, the stock remained negative for the year, down 10% for 2019.

"Moreover, management projected a bullish tone on near-term demand, indicating that they were 'highly confident' in exceeding their Q4 deliveries guidance of 105k cars," Bernstein analyst Toni Sacconaghi said in a note to investors. Bernstein has a market-perform rating on Tesla with a $325 price target.

Even more skeptical analysts, such as UBS' Patrick Hummel, noted that Tesla showed "solid" free cash flow in the quarter. As UBS has a sell rating and $160 price target on UBS, Hummel said the firm intends "to review our financial model on Tesla following the results."

– CNBC's Michael Bloom contributed to this report.

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