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Tesla [ NDQ:TSLA ] continues to make great strides in top line growth with 3Q sales growing +39% year on year, therefore beating market expectations. Scale also accompanied sequential and year on year improvements in operating margins – now at 9.2%, representing the relatively fixed cost nature of the factories.

Car sale volumes rose offsetting lowered prices as the mix shifted to lower range vehicles. Cash flow in recent quarters has been healthy, which means the company can now start self-funding its growth.

Rivals are investing to bridge the technological gap with Tesla and there have been new electric portfolios emerging from all car manufacturers. To stay ahead, Tesla is working to vertically integrate operations with the manufacture of its own battery components.

In-house batteries will aid rapid expansion, reduce battery pack cost (by over 50%) – a critical component to exceed cost parity with internal combustion engine vehicles. This will ultimately enable lower priced cars at $25k to become profitable which will target a wider market.

Tesla also has grand plans to continue its technological superiority through autopilot / self drive cars, together with its energy business, Powerwall. It believes its energy business will ultimately be as large as its vehicle business and is currently in the process of hiring roofers and installers to increase the deployment rate of these products.

Tesla is set to join the S&P index next week, causing a recent rally in the stock.

Tesla director dealings

In the last three months, other than tax or option related transactions, there has been notable selling from: Kimbal Musk (Board of Director) on 1 Sep for $7.6m worth of shares at $476/share, and Zach Kirkhorn (CFO) with sales totalling $1.5m over the last three months. (Source: hl.co.uk)

Short positions (active in last 3 months): 46.5m shares shorted (1.0 days to cover) down from 47.8m in previous month, trekking down from the highs in June. (Source: nasdaq.com).

*All reference to results sourced from the company’s published data including the Annual report 2019, 3Q20 report, press release and webcast of related call. References to multiples or yields sourced from nasdaq.com.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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