Tesla shares surge as analysts react to Q3 earnings, Musk predictions

Tesla shares soared roughly 19% Thursday morning, putting the stock on pace for its best day in more than three years, following reactions to its better-than-expected third-quarter earnings report Wednesday night.

The company reported revenue of $25.18 billion, which came in just under analysts’ expectations of $25.37 billion but was up 8% compared to a year earlier. Tesla also reported an earnings per share of 72 cents adjusted verses 58 cents expected by analysts.

“We expect this surprising earnings beat to power a strong positive reaction in Tesla shares Thursday, given the degree to which investors have become conditioned to earnings misses from the company,” wrote analysts at JP Morgan in a note Thursday.

The company’s profit margins in the third quarter were boosted by $739 million in revenue for automotive regulatory credit, which the JP Morgan analysts noted as a “potentially unsustainable driver” of cash flow performance for the future.

Automakers are required to obtain a certain amount of regulatory credits every year, and if they can’t meet the target, they can buy credits from other companies. Tesla has excess credits because it only makes electric vehicles.

Tesla CEO Elon Musk said during an earnings call Wednesday that his “best guess” is that “vehicle growth” will reach 20% to 30% next year, citing “lower cost vehicles” and the “advent of autonomy.” That prediction was ahead of the 15% expected by analysts surveyed by FactSet.

Analysts at Morgan Stanley rated the stock overweight, calling Musk’s 2025 vehicle delivery growth prediction a “maybe” and settling their estimate at 14%.

It “clearly depends on the company’s ability to improve affordability through cheaper model (next gen) introduction, financing offers and improved features,” the Morgan Stanley analysts wrote in a note on Thursday.

CNBC’s Lora Kolodny contributed to this report.