Saturday, July 20, 2024

Tesla Motors Inc (TSLA) Earnings Preview: Swing To Profit Expected


Tesla Motors Inc (NASDAQ:TSLA) will release its fourth quarter earnings report in a matter of hours, and all of Wall Street will be watching not only for the key numbers but for management commentary on more pressing matters that could suggest the future of the automaker. Sentiment on Tesla is quite low as investors spurned the stock amid fears of it tanking on tonight’s earnings report.

Tesla MotorsIndeed, the markets have thus far greatly punished companies that haven’t given a strong outlook for this year, so odds are that we can expect quick movement in the automaker’s shares after hours. So far, the stock is on track for a 15% weekly decline—or worse. Already year to date, Tesla shares have plunged by nearly 40%.

What to expect in Tesla’s earnings report

Tesla Motors Inc (NASDAQ:TSLA) is expected to post adjusted earnings of 16 cents per share for the fourth quarter (although some estimates peg that number as low as 8 cents), compared to the year-ago quarter’s 13-cent per-share losses. If the automaker can manage an adjusted profit, it would finally put an end to the four-quarter streak of losses. Analysts are looking for $1.85 billion in revenue, an increase from the $1.1 billion reported in the previous year’s fourth quarter.

Investors and analysts will also be looking for an update on delivery numbers. Unfortunately, Tesla has not been doing well in this department, particularly because the Model X is proving to be extremely difficult to manufacture. The automaker said it delivered 50,580 vehicles last year, reaching the low end of its most recent guidance, which had been lowered throughout the year. Management is also expected to guide for 2016 deliveries.

Trouble with the Model X

Analysts from multiple firms have been weighing in on all the production problems Tesla is having with manufacturing the Model X. Morgan Stanley analyst Adam Jonas, also a notable Tesla bull with an Overweight rating and $333 price target on the automaker’s stock, listed some areas of concern related to the Model X but added that he still thinks the recent pullback presents a buying opportunity (no surprise here).

For example, Jonas questioned why no official auto magazine has test-driven the Model X and believes such a review “would easily be one of the most anticipated and important auto reviews of 2016.” He still thinks the falcon-winged doors are the biggest production problem as they are extremely technical and unusual in the auto industry. As a result, Tesla has understandably chosen to delay the vehicle to make sure the doors are made correctly.

The Morgan Stanley analyst warned that the manufacturing problems could weigh more heavily on cash flow than what investors are currently expecting and suggested even that Tesla might have to redesign those troublesome (but very cool) doors. However, his model doesn’t assume that the automaker redesigns the doors, which would burn even more cash.

In addition to the Model X, analysts may also have questions about the upcoming Model 3 tonight on the earnings call.

Shares of Tesla Motors Inc (NASDAQ:TSLA) dipped by as much as 1.47% to $146.07 per share a little more than an hour ahead of tonight’s earnings report.


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Author: Red

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