Tesla’s Ability to Make Money Is Under Spotlight as Results Loom
Signage for Tesla Inc. is displayed outside one of the company’s showrooms in Beijing, China. (Photographer: Giulia Marchi/Bloomberg)

Tesla’s Ability to Make Money Is Under Spotlight as Results Loom

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(Bloomberg) -- Tesla Inc. sold a record number of cars during the second quarter. But did the company make enough money while doing so?

That is what investors and analysts will be most focused on when the electric vehicle maker reports results after the market close on Wednesday. Tesla delivered 95,200 cars to customers during the second quarter, beating most estimates, but analysts worried that the rapidly growing share of the lower-margin Model 3 sedan, along with heavy discounts, might weigh on profits.

“We find the company’s intense focus on hitting short-term targets somewhat curious for a story supposedly long-term focused,” RBC Capital Markets analyst Joseph Spak wrote in a note. The analyst said he continued to see evidence that the Model 3 has hampered the demand for Model S and Model X.

Barclays analyst Brian Johnson lowered his quarterly loss estimates for the company last week, noting the strong sales, but said the numbers showed “Tesla prioritizes delivery volume above margins.” Johnson now expects a loss of 16 cents a share, down from his prior estimate of a loss of 71 cents.

Analysts on average expect Tesla to report a loss of 31 cents a share, smaller than the 48-cent loss estimate a month ago, according to data compiled by Bloomberg, while the gross margin estimate has stayed essentially flat over the same period.

Any comment from the company on its full-year delivery outlook of 360,000 to 400,000 units will be closely watched as well. Tesla did not reaffirm the guidance when it reported quarterly delivery figures earlier this month.

“We continue to believe that despite the impressive second-quarter demand rebound, the ability to hit its aggressive 2019 unit guidance of 360,000 to 400,000 will be a Herculean task,” Wedbush analyst Daniel Ives wrote in a note published on July 22.

What Bloomberg Intelligence says

“The nascent nature of Tesla’s global scope makes sales growth a favorable measure, given pent-up demand abroad, though the cost of this expansion poses a considerable challenge to profitability.”

“Record deliveries in second-quarter may be a double-edged sword, as the company develops its global customer base faster than any other competitor, but does so unprofitably -- for the second consecutive quarter.”

Kevin Tynan, autos analyst

Just the numbers

  • 2Q adjusted loss per share estimate 31c (range loss/share $1.11 to EPS 95c)
  • 2Q revenue estimate $6.43 billion (range $5.73 billion to $7.17 billion)
  • 2Q free cash flow estimate $235.5 million
  • 2Q adjusted automotive gross margin estimate +17.1%
  • 2Q capital expenditure estimate $583.9 million (range $500 million to $650 million)
  • 3Q adj. automotive gross margin estimate +18.5%
  • For deeper estimates see TSLA US Equity MODL

Data

  • Tesla 11 buys, 9 holds, 16 sells; average PT $265: Bloomberg data
  • Implied 1-day share move following earnings: 7.3%
  • Shares fell after 7 of prior 12 earnings announcements

Timing

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