Tesla Inc shares boosted on Thursday as Wall Street analysts stated the company had turned a corner with profitable third quarter results and it may no longer need need to raise outside capital.
Increasing 12 percent at one point in early trading, the move in shares has contributed as much as $6 billion to Tesla’s market value, capping a deafening few months for the company and its CEO, Elon Musk.
Company shares hit a record in August but decreased again as Musk was sued by short-sellers and U.S. regulators for tweeting, and then swiftly postponing, a plan to take the company private.
Wall Street analysts have been telling for months that the company would need to raise more funds to sustain a ramp up of production of the crucial Model 3 sedan, but there are those who said on Thursday that might no longer be necessary.
“Simply put, deliveries and earnings are the only battles that matter,” stated Gene Munster, an analyst with firm Loup Ventures.
“It will go on for years, but every time Musk and Tesla beat expectations, they win another battle in that war. Profitability is getting better at a rate where the company is on track to generate enough cash to meet its $1.7 billion debt obligations.”
The automaker reported free cash flow of $881 million in the quarter – the first time since the third quarter of fiscal 2016 – and Musk stated the company will maintain that in the coming quarters.
Musk has been saying since May that Tesla has no strategy to raise equity or debt.
“Assuming R&D spending is not delayed and Tesla is not forced to introduce a lower price (Model 3) prematurely to maintain volume, Tesla could be self-funded,” Jefferies analysts noted in a client note.
Tesla reported profit of $311.5 million, or $1.75 each share, for the third quarter ended September 30, compared with a loss of $619.4 million, or $3.70 per share, a year ago.