Tesla turns huge profit in 3rd Quarter

Elon Musk aims to make Bob Lutz swallow his filthy cigar. Lutz predicted Tesla was going under.

Tesla Inc. blew away expectations with just the third quarter of positive earnings in its history, bolstering Elon Musk’s bid to make selling electric cars a financially sustainable business.

The profit and cash that Tesla generated sent its shares surging to levels last seen in mid-August, when the chief executive officer was still in the midst of a short-lived gambit to take the company private. The stock sold off in the intervening months, after Musk’s claim that he had “funding secured" for such a deal proved faulty and landed him in legal jeopardy.

All the while, Tesla was achieving long-awaited breakthroughs to boost production of Model 3 sedans. Buyers — many of whom had been waiting more than two years to take delivery — quickly made it one of the top-selling sedans in the U.S.

Tesla is still far from being a full-line automaker, and it’s followed up past quarters of profitability with strings of more losses. It’s still nowhere close to generating revenue and earnings to contend with the likes of Toyota Motor Corp. or BMW AG. But even investors who’ve been among the most vocally bearish about the company have started to change their view as Musk lures away buyers of Camry and 3-Series sedans.

“It is the most encouraging sign of sustainable profitability that we’ve seen in three years," said Gene Munster, a managing partner at venture capital firm Loup Ventures. “Tesla did all of this despite the distractions around Elon himself, and the positive report reverses some of the damage that’s been done."

Tesla reported adjusted net income of $2.90 a share, soundly beating analysts’ average estimate for a small loss. Free cash flow was about $881 million, a turnabout from the billions of dollars Tesla was burning on a quarterly basis while it was struggling to ramp up the Model 3.