Even before the dust from last week’s big energy-storage unveiling has settled, it’s time for owners of TSLA stock to prepare for another quarterly earnings update from Tesla Motors. (TSLA).
The recent rally has pulled TSLA out of a pretty well-established downtrend, at least partially spurred by the now-official introduction of the Powerwall device — a big battery that can deliver stored electricity to a home that otherwise has access to none.
The fact that TSLA stock has held onto those gains in the meantime, though, at least tacitly implies traders are looking for decent numbers in the Tesla earnings report.
The question is, is the optimism merited?
Tesla Earnings Outlook
As a refresher, the Tesla earnings numbers posted in February for the fourth quarter of 2014 were less than thrilling. Analysts were calling for a top line of $1.2 billion, but the company only posted sales of $1.1 billion. On the earnings front, the company lost 13 cents in the quarter versus the market’s expectations for a profit of 31 cents per share of TSLA stock.
A lack of demand wasn’t the impasse, however. Tesla Motors simply couldn’t make enough vehicles in the fourth quarter, constrained by weather and shipping issues. It was aiming for 11,180 vehicle deliveries, but was only able to get 9,834 out of them out the door.
Still, year-over-year revenue was up 55%.
For Wednesday afternoon’s Tesla earnings report, analysts are expecting sales to roll in at $1 billion, up 46% from the $713 million in sales Tesla generated in the first quarter of 2014. These same pros are calling for a loss of 50 cents per share of TSLA versus a loss of 12 cents per share in the same quarter of 2014.
The real litmus test, however, will be the number of cars Tesla sold last quarter. In early April the company reported it delivered 10,030 vehicles in the first calendar quarter, which would be a record. Bear in mind, however, that many of those deliveries (around 1,350) may have been deliveries that were delayed during the fourth quarter and pushed into this year. If investors wanted to get picky about something in an effort to send the stock lower, this may well be their most opportune opening.
3 Things for TSLA Owners to Mull
While all the numbers revealed by the Tesla earnings news after the close of trading on Wednesday will be well watched, it’s not as if the market is going to even feign disappointment of the company posts a loss.
Tesla is almost certainly going to post a loss. But that doesn’t matter.
TSLA stock is a story stock, and there are three more important factors driving the stock’s price from here:
- Reselling Off-Lease Cars: It largely went unnoticed, but last week, Tesla finally began selling electric vehicles that have been freshly turned in off-lease. Many more such used vehicles are about to become available too, as three-year leases were the most common timeframe, and sales of the Model S began in earnest in the middle of 2012. It remains to be seen how much, or if, the availability of these vehicles will impact deliveries of new ones.
- Powerwall: The 800-pound gorilla in the room heading into the Tesla earnings announcement isn’t an update on the number of electric vehicles Tesla is selling. It’s the at-home power-storage solution Musk unveiled last week. Called Powerwall, at a price of somewhere between $3,000 and $3,500 apiece, consumers can provide backup battery power for their homes. While some TSLA investors and Tesla fans were impressed, others are skeptical about the size of the market and benefit for such a device. (On the flipside, its utility-scale battery packs do see more marketable.)
- Dwindling Cash: A la Amazon (AMZN) and Netflix (NFLX), Tesla is spending heavily now to dominate the market later. For the same reason Netflix and Amazon investors have a right to question what the long-term plan for profitability is, owners of TSLA stock are understandably concerned that Musk is burning through too much cash. Tesla took $465 million out of the bank last quarter to invest on growth, and at the time added it was planning on another $1.5 billion in capital expenditures. That would leave it with about $400 million, without the benefit of a highly-profitable division to refill the coffers anytime soon.
Though these three themes may or may not come up during the presentation portion of the earnings call, hopefully they’ll all be addressed during the Q&A segment. Of the three, the cash-burn has the most potential to create problems.
Bottom Line for TSLA Stock
While there’s plenty to be concerned about, Elon Musk has proven to be a master of turning lemons into lemonade. Barring some sort of black-swan kind of event last quarter (like disastrous sales in China), TSLA seems to have the wind at its back headed into its earnings announcement.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.