The third quarter earnings report was announced recently by Tesla. The company shares rose to about 12.7% following the announcement. Since the infamous August declaration of Elon Musk of being in discussion to move Tesla private share to about $420, and secured the necessary funding for the deal, the company’s stocks have been on an amazing roller-coaster ride. Tesla according to analyst polls is to post about $6.05 billion revenue (up 103% annually due to major Model 3 delivery increase) & negative $0.95 GAAP EPS. Consensus for non-GAAP EPS is a favorable negative of $0.03. But the commentary made by the company on future production, earnings and sales did have a bigger impact upon its stock than the reported EPS figures and revenue. There are many who have been eyeing at the Tesla earnings date.
Things investors should watch out for
- Model-3 Production guidance: The company’s quarterly production and deliveries had been discussed shortly after quarter end. 53,239 Model-3 units were reported to be produced for Q3, up from the Q2 28,572. But with 5,300+ Model units produced during Q3 final week, the company is found to fall short of upping production goal to 6,000 units/week by late August. Production target changes if any is likely to be watched very closely. The company in Q2 shareholder letter insisted aiming to grow its Model Production to 10,000 units/week.
- Cash-flow and profit expectations: With Q3 consensus out, it is doubted by many analysts that the company presently witnessing greater scale economies for Model3 production saw profit last quarter. But on average, a modest positive amount of FCF (free cash flow) is expected for Q3 & Q4. Q4 is set to improve to about $0.78 for non-GAAP EPS. Layoffs were reported by the company to pare capital spending and gain profit as well as avoid 2nd half capital raise, is likely to provide fresh reports on the company’s profit outlook with regards to its shareholder letter.
- Sales expectations of Model S & X: According to company reports, 14,470 units of Model-S luxury Sedan had been delivered in Q3 along with 13,190 units of Model-X luxury crossover. These numbers exceeded analyst expectations. Although higher import tariffs hurt Chinese Model S & X sales guidance is reiterated by the company for 100,000 combined Model S & X 2018 deliveries. But there has yet not been issued 2019 guidance.
- Model-3 Margin Trends: In August, Tesla had guided for Model 3 GM (gross margin), found in Q2 to be slightly positive. in Q4, it is expected to improve to about 15 & 20 percent, as the company stands to gain from greater scale. It is regarded to be a cautious outlook taken when compared to 25% Model-3 GM original forecast after ‘stabilizing’ of production at about 5,000 units/week. Still, Model 3 Standard Battery production is yet to start, something produced to be launched with a starting price of $35,000.
Therefore, investors do have something to benefit from the company’s share in the near future.