Shares of Tesla (NASDAQ: TSLA) rose 30.7% in October, according to data from S&P Global Market Intelligence, after electric vehicle manufacturer and power storage solution manager announced better profit than expected for the third quarter of 2019.
Almost all of Tesla's gains last month came in the two trading days following its October 23 report. In that report, Tesla specifically detailed a surprise adjusted (non-GAAP) earnings of $ 1.86 per share – crushing estimates for an adjusted loss of $ 0.42 per share – despite a decline in earnings at 8%, to about $ 6.3 billion.
Tesla set fresh records for both vehicle production and deliveries – which grew to 96,000 and 97,000 units, respectively – during the quarter. But the top line shrank because the bulk of unit sales (nearly 80,000) came from Tesla's cheaper Model 3 sedan, deliveries increasing by 42% year over year, which put the company well on track to exceed the lower end of the ambitious goal of deliveries from 360,000 to 400,000 units.
Nevertheless, Tesla managed to simultaneously reduce operating expenses by 16% while generating a staggeringly better than expected $ 371 million in free cash flow (against estimates of only $ 32 million) during the quarter.
If that wasn't enough, Tesla gave investors several reasons to be excited about what's to come.
First, Tesla confirmed that Shanghai Gigafactory is now producing full cars on a trial basis as it awaits approval from local authorities that should pave the way for ramped production at the Chinese plant. Tesla further teased that it believes "China could become the largest market for Model 3."
And Tesla's vehicle lineup is ready to expand into two lucrative segments. First, Tesla said the launch of its Model Y compact crossover vehicle is ahead of schedule, and production is expected to be in summer 2020. Then, after last month's update, Tesla CEO Elon Musk separately confirmed the company will unveil its long-awaited pickup model at an event on November 21, 2019.
Finally, there is no mention of the potential for Tesla's new third-generation Solar Roof product, installations that Musk has said the company hopes to ramp "as quickly as possible" to more than 1,000 roofs per week over the coming months.
Of course, most investors know how to take some of those promises with a grain of salt given Musk's history of setting bold goals. But given Tesla's vastly improved operating efficiency in the interim last quarter, it's no surprise that the shares declined in response last month.