Looking Ahead for Tesla Stock Earnings
The quarterly earnings release for Tesla Motors, Inc. (NASDAQTSLA), scheduled for Tuesday November 3rd, will be one of the closest-watched market events this week. The value of Tesla stock will hinge on the words of Elon Musk as much as on numbers, but the overall outlook is expected to be positive.
Tesla stock was up 3.32% at the close of trading hours one day before the quarterly earnings are due. Of course, since the earnings presentation is due after the closing bell, TSLA stock will gyrate through the day as investors sort out their expectations.
Analysts are predicting that earnings will take a hit this quarter, with an average estimate pegging the loss at $0.60 a share. The negative earnings are a (hopefully short-lived) departure from tradition, considering that Tesla stock returned two cents a share during the same quarter last year. (Source: “What to look for in Tesla’s earnings,” MarketWatch, November 2, 2015.)
In terms of sheer revenue, analysts have high estimates for Tesla. They’re hoping for $1.24 billion in the quarter, up $932 million year-over-year. That’s a high bar for Tesla stock to cross, making me think investors should keep an eye out for the top line figures.
Here’s how I would think about Tesla’s earnings.
The Upside for TSLA Stock Price
The $0.60 cent loss for each Tesla stock is meaningless. If anyone is holding the stock for this quarter’s earnings, then they are making a bad play. You hold Tesla stock if you’re thinking about the mid- to long-term.
Thus, the earnings call with Elon Musk is going to move TSLA stock much more than anything in the Securities & Exchange filings. And make no mistake; Elon Musk has some tough questions to answer.
Investors will be looking to understand why the Tesla Model X has shipped so few of its orders. Earlier this year, Tesla stock took a dip when Elon Musk lowered the number of expected deliveries in 2015 from 55,000 to “somewhere between 50,000 and 55,000.”
The stock will be particularly sensitive to the Model X delivery numbers because only 11,540 units were shipped in the third quarter. Can they realistically meet their end of year targets? We’ll see.
Moreover, stockholders will be asking Elon Musk questions about demand in China, a possibly lucrative frontier for Tesla. The earnings call will also cover the Powerwall and Powerpack, Tesla’s new line of slim, elegant batteries that can be hung up in a garage or stacked in any quantity.
Elon Musk Could Swing Tesla Stock Either Way
Markets are going to look to Elon Musk for reassurance and this time it may be a tough sell. The stability of Tesla will depend on Musk’s ability to convince investors that the company can effectively scale its operations to meet growing demand.
Mass producing both the Tesla Model S and Model X should be fluid in the coming months considering that Tesla is adding another piece to its lineup. Tesla stock is expected to make a huge run in March 2016, when it starts taking orders for the Tesla Model 3.
The Model 3 is Tesla’s first reasonably-priced sedan, priced somewhere around $35,000. Unless Elon Musk can pacify investor concerns about scaling up production, they’ll start to lose faith in the Model 3. And that would be a disaster for Tesla stock.