Tesla shares, bonds jump after surprise third quarter profit

(Reuters) – Tesla Inc shares soared on Thursday after the electric carmaker surprised Wall Street by delivering on Chief Executive Officer Elon Musk’s promise of a profit in the third quarter even as doubts remained over its long-term prospects.

As many as five brokerages raised their price targets on Tesla shares, but there were no outright upgrades and the company’s average rating on Wall Street remained “hold”, with just 11 of 34 analysts recommending investors buy the stock.

The company’s shares rose 18% to $301 in premarket trade. If those gains stick during normal trading, Tesla would again be worth more by market capitalization than General Motors, making it the United States’ most valuable car company.

Tesla’s $1.8 billion junk bond due in August 2025 surged 3 points in price following the results, driving its yield to the lowest since March 2018.

“A strong step forward, yet Tesla will need to put together a string of similar data points to demonstrate the sustainability of results … and its track record has been spotty on this,” said analysts at brokerage Credit Suisse.

Investors in the past have shown impatience with the company’s serial failures to meet financial and production targets and shares in the company are still down more than a third from their 2018 peak of almost $390.

The company has been struggling with margins and a new Chinese factory is expected to be help on that front, but analysts said the jury was still out on whether it can sustain the push into profitability.

Click here tmsnrt.rs/360v0Y4 to see charts on Tesla’s margins and deliveries.