With so much attention focusing on Elon Musk, Tesla’s outspoken CEO, it is little wonder that there is so much interest around the release of the company’s earnings at close of play in the US on Wednesday.
Tesla has caused plenty of hype, with Musk’s entrepreneurial stance not always endearing himself to investors. However, they should be watching the company’s performance with interest later today.
Tesla is currently at a very important crossroads. Amid reports of severe losses and an inability to make profits in several quarters, production of the Model 3 has finally stepped up to hit expected results levels. If this factors in, then today’s results could be quite interesting.
The press remembered the Q1 report as much for calling out “boring” questions as for how the results looked, and Musk argued with several of his critics on the social media platform Twitter, which has not helped cement a status of taking the company completely seriously.
With near-term profitability already an issue as well as potential demands to raise more capital, the Q2 performance will be more important than ever at a time when Tesla wants to break into the market and position itself as more than just an outlier sitting firmly in the mainstream.
FactSet polled a group of analysts for their estimates, and the expectation is for revenue to be up 43% on the back of good Model 3 sales to return a revenue of $3.99bn. With production of the Model 3 now ramped up to current capacity, non-GAAP should post a loss of $2.78 per share.
In its Q1 report, Tesla indicated that it expected Q3 and Q4 to be fully GAAP-profitable with available cash flow to stem the need for raising additional capital.
Tesla has already cut jobs and reduced its capital spending budget this year to try and improve the balance sheet, so analysts are intrigued to see if the Q2 report calls for more of the same. Given that Musk has asked suppliers in recent months to refund some of the money given to them in the past, alarm bells are already ringing on this front.
The company also finally hit its goal of producing 5,000 Model 3 cars a week and went to such steps as building a giant tent to create more space to increase production output. It is aiming to reach production levels of 6,000 Model 3s per week by the end of August.
Eyes are also on Musk to see if he offers any details on lower-spec reproductions of the Model 3 with a standard battery and reduced cost. Currently, orders are only in production for higher-spec models.
Given the measures taken by Tesla to bring its production line up to necessary measures, investors are also looking to see how this has affected the gross margin of the product and whether the bottom line reduces as a result.