The Big One for TSLA Stock
Tesla Motors Inc (NASDAQ:TSLA) is announcing earnings after the closing bell today. It is the company’s first quarterly review since its “Model 3” unveiling. Naturally, tensions are running high and analysts are expecting a dramatic movement in TSLA stock. The direction of that movement, however, remains uncertain.
Technology stocks have shown significant weakness since Apple Inc. reported earnings last week. A slowdown in “iPhone” sales, particularly in the Greater China region, really put a damper on the NASDAQ Composite.
Many of the investors I talk to are hoping Tesla can inject some optimism into the fold. Considering the dismal earnings season we’ve had, an earnings beat by Tesla would go a long way in supporting the broader market.
Thus far, only Facebook has really exceeded expectations.
The number to watch for Tesla is going to be its “deliveries,” which is the company’s name for sales.
Tesla has struggled to scale its production in the past. Initial deliveries of the “Model X” were delayed last year. Then in the final quarter of 2015, Tesla had to dial back its estimated output. Finally, the company under-delivered during the first quarter of 2016. That’s not a good record, to say the least.
But with 400,000 pre-orders of the Model 3, Tesla has to prove it can play with the big kids. It needs to erode any production bottlenecks and scale up immediately.
A survey by FactSet shows analysts still expect the company to produce a loss. They think investors will have to stomach a hit of $0.60 per share for this quarter (and probably the next) before Tesla turns cash positive. (Source: “What to expect from Tesla’s earnings,” MarketWatch, May 3, 2016.)
Revenue is estimated to jump 45% year-over-year, from $1.1 billion to $1.6 billion.
But again, the real number to watch is deliveries. Tesla aims to deliver 80,000 to 90,000 cars in 2016, which is far more than the 52,000 it churned out last year.
By the end of 2017, Tesla needs to be capable of putting out hundreds of thousands of cars. Elon Musk has stated previously that he hopes to reach 500,000 cars annually by 2020. (Source: “Tesla unveils $35,000-Model 3 with range of 215 miles,” CNBC, April 1, 2016.)
It is an extraordinarily high bar, but hey, we have nothing else with which to measure Tesla. Every other American car company was founded eight or nine decades ago.
It’s such a capital-intensive business that no one has dared to challenge GM or Ford. But Tesla is willing to take on the whole world. It designed a wonderful car and there is certainly a lot of demand. All that remains is for the company to build the damn things.