TeslaIt is (TSLA 3.34%) The stock has had an up-and-down year, but its shares soared following its third-quarter earnings report and optimistic forecast for future deliveries. After recovering from the negative returns of the first half of 2024, the stock is currently around breakeven for the year.

THE electric vehicle (EV) The automaker continues to talk about its plans for autonomous vehicles and its robotaxi, which it previewed earlier this month. Let’s take a closer look at the company’s earnings, comments from CEO Elon Musk, and whether now is the time to buy the stock.

Regulatory credits improve outcomes

After a decline in the first two quarters of the year, deliveries increased by 6% in the third quarter. Deliveries of the Model 3/Y increased 5% to 43,668 vehicles, while other models, including the Cybertruck, saw deliveries climb 43% to 22,915 vehicles.

Total vehicle production during the quarter increased 9% to 469,796 vehicles. Production of the Model 3/Y increased 6%, while production of other models jumped 91%.

Tesla’s automotive revenue increased slightly by 2% to $20 billion. A 33% increase in automotive regulatory credit revenue, to $739 million, contributed to the gain. These are credits that Tesla sells to other automakers to help them comply with environmental requirements in certain states and regions. Revenues from regulatory credits are generally considered unpredictable because their market is quite opaque.

These credits are also pure margin, which helps both gross margins and profits. Tesla’s overall gross margins jumped 195 basis points to 19.8%.

Overall revenue increased 8% to $25.2 billion. Revenues from energy production jumped 52% to $2.4 billion, and revenues from services and other jumped 29% to $2.8 billion.

Adjusted earnings per share (EPS) rose 9% to $0.72, well above the $0.58 consensus set by LSEG, despite a slight loss in revenue. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) climbed 24% to $34.7 billion.

Optimistic outlook

Looking ahead, Tesla was very optimistic for 2025, with Musk saying his “best guess” is that the company would increase deliveries by 20-30% next year. That was ahead of the 15% growth in shipments for next year estimated by analysts, as compiled by Set of facts.

Growth in deliveries is expected to be fueled by Tesla offering more affordable models starting in the first half of next year. However, Musk didn’t give details on what these more affordable models would be – he only said preparations were being made to start launching them. According to Reuters, the company gave up on a cheaper Model 2 earlier this year, only to put it back on the table. It also discussed the possibility of selling its two-seater robotaxi directly to customers for $30,000 in 2026.

Tesla continues to talk about autonomous driving and its Cybercab. It said it expects its entire vehicle lineup to achieve full autonomy next year. Musk went on to say that the company makes 35,000 autonomous vehicles per week and that of the 7 million vehicles it makes, most are autonomous.

Meanwhile, Musk said customers in the Bay Area can already hail a ride from his robotaxi, but with a safety driver. However, according to the California Public Utilities Commission website, Tesla does not have a license to operate a ride-sharing service in the state.

Image source: Getty Images.

Is it time to buy the stocks?

Tesla had a much better quarter than earlier this year, with deliveries up. However, despite delivering 6% more vehicles, automotive revenue grew just 1% outside of regulatory credits, still representing fairly lackluster growth for its core business. Meanwhile, high-margin regulatory credits should generally not be relied upon.

The forecast of growth in deliveries of 20 to 30% seems bold. The growth of electric vehicles has slowed and Tesla faces increased competition in this market from established players and new entrants. Meanwhile, in China, the world’s largest electric vehicle market, a price war is raging. And while Tesla has talked about a more affordable model next year, there are no details on what that might look like. During the earnings conference call, Musk said a standard $25,000 model would be “dumb” and “useless.”

While Tesla has talked about self-driving and the number of autonomous vehicles it produces, the simple fact is that the company does not sell or produce vehicles that do not need alert and ready humans behind the wheel. At the same time, the National Highway Traffic Safety Administration (NHTSA) is investigating the company’s fully autonomous driving system following persistent crashes, while its camera-only technology continues to be questioned. This same NHTSA would also have to give approval to Tesla’s Cybercab to begin operating.

Overall, Tesla’s earnings report was quite decent, helped by regulatory credits, and the company generally tends to be optimistic. As such, I would not run out and buy the stock after this rally.