North America

Earnings Preview: Tesla Q1 2017 (TSLA)

By: Craig Bowles

Overview

Tesla, Inc. (TSLA) is slated to report 1Q 2017 earnings after the bell on Wednesday, May 3rd. The earnings release is expected at approximately 4:05 p.m. ET with a 5:30 p.m. earnings conference call webcast available at Tesla Investor Relations.

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Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): The Street estimate is $(0.81) with a range of $(1.79) to $0.23 (Yahoo! Finance). Consensus was $(0.49) three months ago.
  • Revenues: Expectations are for a 126.8% y/y increase to $2.60 bln (range $2.28 bln to $3.25 bln).
  • Deliveries: On 4/2, the company announced they delivered “just over 25,000” vehicles in Q1. (Tesla quarterly deliveries announced a few days after quarter-end will differ less than 1% from the final number.)
  • Deliveries Guidance for 2Q2017: 4,650 vehicles were in transit at the end of Q1, down from Q4’s 6,450.
  • Deliveries Guidance for FY2017: Model 3 production and deliveries are expected late in the second half of 2017.
  • Tesla’s Price/Sales of 6.4 vs a 5-year average of 11.6; Price/Book of 10.7 compares to a 5-year average of 32.9.
  • Analysts view Tesla with 13 Buy ratings, 9 Hold, and 7 Sell, according to MarketBeat.com.
  • Insiders sold 52,921 shares over the last three months and sold a net 1,562,822 shares in the past year (source: NASDAQ.com). The previous quarter’s buying into strength was a bit unusual.
  • Tesla shares have a 1-day average price change on earnings of 5.24%. Options are pricing in an implied move of 5.89% off earnings.

Recent News

  • 04/27: Baird notes Tesla has several significant milestones coming up over the next 18 months. Upcoming catalysts include: 1) continued production ramp; 2) gross margin expansion; 3) gigafactory construction updates; 4) the start of Model 3 production; 5) Tesla Energy ramp; and 6) additional details about the Model 3 and potential introduction of the Model Y/additional products, according to Barron’s.com.
  • 04/26: Consumer Reports lowered its rating for Tesla’s Model S sedan and Model X SUV, according to Barron’s.com.
  • 04/26: Barclays rates Tesla Underweight due to its sky-high valuation but notes an advantage thanks to the willingness of its fans to serve as guinea pigs, according to Barron’s.com.
  • 04/24: Tesla’s ambitions in China struggle with cars that cost 50% and a lack of charging stations, according to Barron’s.com.
  • 04/21: Tesla plans to unveil the semi-truck in September but Stifel lists various difficulties that will have to be overcome, according to a post on Barron’s.com.
  • 04/21: JPMorgan lowered their Tesla price target to $185 from $188 and sees a 2017 loss of -$0.71 after updating their model for the higher than expected deliveries in 1Q17 (25,000 units vs. JPM of 24,000), higher share count post the recent equity raise, and expectation for higher than previously modeled operating expenses, according to Barron’s.com.
  • 04/02: Tesla Model 3 has over 400,000 reservations which Dougherty & Co. notes “for a car with no advertising,” so the company is trying new ideas to deliver vehicles faster, according to electrek.

Technical Review

Seasonality favors spring and summer. The push to current new all-time highs follows multi-year consolidation since early 2014 and traders almost always underestimate size and duration of such breakouts. Point and figure show balance area support around $304. (Chart courtesy of StockCharts.com)

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Summary

Tesla Motors has officially renamed itself Tesla, Inc. The company expects to deliver the new Model 3 by late in the second half of 2017. The company has beaten and missed estimates by an average of $0.87 the past four quarters but three of those were misses. Estimize consensus for a Non-GAAP EPS of $(0.16) on revenue of $2.537 bln compares to analyst consensus of ($0.81) on revenue of $2.60 bln. Deliveries guidance is always of interest.

 

 

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