Just think of Tesla Inc (NASDAQ:TSLA) as a Rorschach test. You know — the pictures of random ink blots psychiatrists show you to see what your subconscious mind’s got going on. See, if you wanted to see TSLA stock in a bearish light, you could do that. Or, if you wanted to see it in a bullish light, the Tesla earnings report posted Wednesday evening could just as easily facilitate that stance.
There was good and bad in it.
Most of the market chose to see the glass as half empty for TSLA stock, by the way, with shares in the red to the tune of over 5% early on Thursday.
Nevertheless, even today’s naysayers have to acknowledge there were some encouraging glimmers of hope nestled in last quarter’s numbers.
Tesla Stock Earnings for Q4
For the quarter ending in December, Tesla reported an operating loss of 69 cents per share on revenue of $2.28 billion. Analysts were only calling for a top line of $2.19 billion, but those same analysts were also calling for a loss of only 43 cents per share of TSLA stock.
The comparison to the fourth-quarter figures from the prior year are similarly split. In the same quarter a year earlier, Tesla lost $2.02 per share on revenue of $1.21 billion.
Of course, adding to the fog that obscured the company’s true health is the fact that the $2.6 billion acquisition of loss-making SolarCity was officially closed in late November, adding to Tesla’s top line, but subtracting from the bottom line. The Tesla earnings report explained that the solar power outfit added $77 million worth of cash to the books, but also added $85 million in expenses.
Still, the post-acquisition picture is a blurry one, with the root cause of the swing back to a loss after Q3’s profit not necessarily being solely attributable to the SolarCity deal. Even the official SEC filing only offers modest details in broad categorizations “automotive,” “energy generation and storage” and “services and other.”
While details were minimal, it’s worth noting gross margins for the energy generation and storage division swung from -4.1% in the third quarter to 2.7% for the fourth quarter, while gross margins for the automotive arm — on a GAAP basis — shrunk from 29.4% in Q3 to only 22.6% in Q4. The gross margin rate on services flipped from a positive 4.8% to a negative 11.3% during the quarter.
All the changes in margin figures reflect the fact that this is a company in transition from being one thing to being something else, and something much bigger than it was — hence the challenge in finding meaning in the quarterly report.
All the same, cars remain Tesla’s core business, accounting for $1.99 billion worth of last quarter’s $2.28 billion in revenue. It sold a total of 22,252 vehicles last quarter, down from 24,821 deliveries during the third quarter. It made, though, 24,882 electric cars during Q4, versus 25,185 completed assemblies for Q3. All those figures were far and away better than year-ago levels.
Preparation and reconfiguration for the Model 3 may have been a production distraction … and not a cheap one. The company incurred $522 million in CapEx last quarter, most of which was spent on preparations for Model 3 production.
Cash flow went negative to the tune of $236 million during the fourth quarter.
Looking Ahead for TSLA Stock
One of those sources of the aforementioned expansion will be, of course, the launch of the Model 3 — the electric car for the masses sporting a sticker price of only $35,000. CEO Elon Musk had previously said the company intends to begin production of the vehicle in July, and reach its maximum output pace of 5,000 of the cars per week during the fourth quarter of this year. Musk reiterated that timeframe on Wednesday.
In the meantime, the company expects to deliver between 47,000 and 50,000 electric vehicles during the first half of 2017 following a record number of orders for the Model S and Model 3 received during the last quarter of last year. Tesla didn’t offer any revenue or earnings guidance.
The company did, however, answer a question many shareholders has silently asking themselves — yes, Tesla is apt to issue more debt or more TSLA stock to raise funds. Musk said the organization could likely afford not to, but doing so presents a potential liquidity risk. The news of the likely fundraising is probably the biggest reason TSLA stock fell in the wake of last quarter’s earnings report.
More than anything though, owning Tesla stock remains an adventure in gauging how traders will feel about the rhetoric, as the results continue to tell us little about the future health of the company.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.