Tesla had 'some unexpected help' when it delivered a surprise Q3 profit, UBS says

  • Tesla reported a surprise third-quarter profit two weeks ago, sending shares up as much as 20%.
  • But new details show that the company’s record profit was boosted by credit sales which the company earned by producing clean energy products, UBS says.
  • The electric-car maker disclosed on Friday that its credits sales were $US189.5 million in total.
  • Watch Tesla trade in real time here.

Tesla surged two weeks ago when it posted a surprise third-quarter profit, with shares up as much as 20%. But UBS said the strong quarter was in part thanks to “some unexpected help.”

After going over the details of Tesla’s new regulatory filing published on Friday, UBS analyst Colin Langan noted that its record profit was boosted by credits sales, which the company earned by producing zero-emission products and can be sold to other companies to satisfy regulatory requirements.

The electric-car maker said it earned $US2.90 a share, well above the $US0.15 loss per share expected by Wall Street analysts. It generated $US6.8 billion in sales, beating the $US6.3 billion that was anticipated.

In the Friday filing, Tesla disclosed that its third-quarter credits sales were $US189.5 million in total, with $US52.3 million in zero-emission vehicle (ZEV) credits sales and $US137.2 million in non-ZEV regulatory credits sales. By Langan’s calculation, ZEV credit sales and non-ZEV credits sales contributed $US0.29 and $US0.77 earnings a share respectively.

Tesla’s previous earnings press release didn’t mention the $US137.2 million in revenue from non-ZEV regulatory credits sales.

“Tesla states they only report ZEV credits in their quarterly update letters because ZEV credits are random while other credits track delivery volume. However, this has not been the case historically. The help from other EV credits in Q3 highlights that underlying operations were not as strong as the original release implied, and increases our confidence that Q4 results will decline despite higher volumes,” said Langan in a note sent out to clients on Sunday.

Langan reiterated his sell rating and $US190 price target for Tesla – 44% below its current price.

Tesla stock is down 2.65% on Monday, but is still up 5.36% this year.

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