What's going on?

Tesla�s stock jumped almost 7% on Thursday after it reported quarterly earnings that handily beat Wall Street�s expectations (tweet this) � and it had some upbeat predictions for the future too!

What does this mean?

Tesla both made more revenue than expected and lost less money during the second quarter. It didn�t spend as much developing its new Model 3 as anticipated in the first half of the year, leaving it more cash than expected (however, expenses are going to ramp up in the coming months along with production).


Investors have been concerned that the launch of the Model 3 could cannibalize sales of its older, more expensive models. On Wednesday, Tesla said sales of its existing models are increasing in July, assuaging some of those fears.

Why should I care?

For markets: Guidance for sales of its existing models helped Tesla�s stock rebound from its recent selloff.

Tesla�s stock lost almost 15% of its value (prior to Wednesday�s results) over the past few weeks following earlier comments that its second quarter sales of its older models would fall short of expectations. Now that it has said sales are increasing in July, the stock has reversed most of those losses. The big question for the coming quarters is how well Tesla executes on the production and delivery of its new Model 3 � Elon Musk, Tesla�s founder, has already warned of the �manufacturing hell� into which Tesla is embarking.


The bigger picture: US auto sales are declining � which may create a headwind for Tesla.

On Tuesday, the major auto companies reported July sales which declined versus last year and fell well short of expectations. The stock prices of GM and Ford fell about 3% following the news. With the widespread adoption of ride-hailing apps like Uber, among other things, personal ownership of cars is declining � putting pressure on auto sales. That could make for a difficult ride as Tesla looks to ramp up its sales.