(Reuters) – Tesla Inc. (TSLA.O) Blockbuster quarterly results and the ability to free-flow enthusiastic Wall Street on Thursday, with several analysts say that the electric car maker does not have to raise capital soon to increase Model 3 production.
A 2018 Tesla Model 3 electric car is shown in this photo illustration taken in Solana Beach, California, US, on June 1, 2018. Picture taken on June 1, 2018. REUTERS / Mike Blake
The company's stock rose 12 percent to $ 322.89 in pre-market trading, which put the stock on track to raise its market value by $ 6 billion.
The stock has been volatile over the past few months, reaching a record high in August when chief executive officer Elon Musk planned to keep the company private, but collapsed after canceling his bid weeks later.
Tesla reported free cash flow of $ 881 million for the quarter, the first time since the third quarter of fiscal 2016. Musk said it will continue to do so in the coming quarters.
Musk has said since May that Tesla does not intend to raise equity or debt, but most analysts have remained skeptical about past failures to deliver on their promises.
"Assuming that spending on research and development does not slow down and Tesla is not forced to introduce a lower price (Model 3) to sustain its volume, Tesla could be self-financing," Jefferies analysts wrote in a client note.
"Tesla is about growth, not free cash generation, so we expect the money to be invested in growth and support the current leverage if Tesla has sustainable positive free cash flow," they said.
Tesla generated $ 311.5 million or $ 1.75 per share for the third quarter ended September 30, compared to a loss of $ 619.4 million or $ 3.70 per share last year.
Musk's fondness for controversial controversies with his erratic tweets put Tesla under pressure to convince Wall Street that the company could make models 3 in a cost-effective manner and actually make a profit.
"We believe the TSLA narrative is changing as the company becomes a sustainable profitable company," said Baird Research analyst Ben Kallo.
While capital increases may not be necessary for short-term operating purposes, it will be necessary to finance the growth targets at some point in time, analysts at JP Morgan said.
At least three brokers have raised their price targets on the stock. Of the 29 brokers that cover the stock, 10 have a "buy" or higher rating, nine hold and 10 have a "sell" or less.
The median target price was $ 316.
Reporting by Supantha Mukherjee and Jasmine I S in Bangalore; Arrangement of Saumyadeb Chakrabarty