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Tesla shares jump after earnings report fulfills Elon Musk's profit and cash-flow promises

Tesla shares jump after earnings report fulfills Elon Musk's profit and cash-flow promises
Prospective customers talk with sales associates as a Model 3 sits on display in a Tesla showroom in Denver in July. (David Zalubowski / Associated Press)

Tesla Inc. stock jumped Thursday morning after an upbeat report showed booming sales for the electric-car maker’s Model 3 and fulfillment of Chief Executive Elon Musk’s promises that Tesla would turn a profit and improve its cash flow.

The stock surged as much as 11% in after-hours trading Wednesday following the report, which came after the close of U.S. markets. The stock gave back some of those gains in regular trading early Thursday, but still was up 5.4% at $304.14 a share an hour after trading opened.

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Musk emphasized the importance of generating sustainable profits in a conference call with analysts Wednesday.

“This quarter was an important step toward that,” Musk said. He repeated earlier promises that Tesla will be profitable and have positive cash flow going forward.

The company said Wednesday that it earned $311.5 million on $6.82 billion in revenue in the third quarter, delivering a quarterly profit for the third time since 2013. Free cash flow came in at a positive $881 million. Cash on hand rose to $3 billion, up $731 million from the second quarter.

Earnings were a positive $1.82 a share, well above analyst forecasts, which had ranged from a $1.75 loss to an 88-cent gain.

The results come amid rising production and sales of Tesla’s Model 3 and mean the Palo Alto company can now make a $230-million bond payment due in early November with cash. An additional $920 million is due in March. The March debt has a stock conversion price set just over $359. If Musk can boost the stock price that high in December, bonds could be converted into stock, and Tesla would escape paying the principal.

Musk predicted worldwide demand for the Model 3 eventually would be 500,000 to 1 million cars a year. That would place the Model 3 among the top 25 models, based on 2017 sales. Only Ford's F-series pickups sold more than 1 million units that year.

Tesla is by far the world’s best-selling electric car brand. Based on third-quarter deliveries, the Model 3 is now the fifth-best-selling sedan of any power train in the U.S., behind only the Toyota Corolla and Camry, and Honda Civic and Accord.

Times staff writer Russ Mitchell contributed to this report.

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