North America

Earnings Preview: Tesla Q2 2017 (TSLA)

By: Craig Bowles

Overview

Tesla, Inc. (TSLA) is slated to report 2Q 2017 earnings after the bell on Wednesday, August 2nd. 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.

Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): The Street estimate is $(1.76) with a range of $(2.43) to $(0.33) (Yahoo! Finance). Consensus was $(0.64) three months ago.
  • Revenues: Expectations are for a 102.5% y/y increase to $2.57 bln (range $2.24 bln to $2.83 bln).
  • Deliveries: On 7/3, the company announced they delivered “just over 22,000” vehicles in Q2. (Tesla quarterly deliveries announced a few days after quarter-end will differ less than 1% from the final number.)
  • Deliveries Guidance for 3Q2017: 3,500 vehicles were in transit at the end of Q2, down from Q1’s 4,650 and 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 6.0 vs a 5-year average of 11.6; Price/Book of 11.2 compares to a 5-year average of 32.9.
  • Analysts view Tesla with 13 Buy ratings, 11 Hold, and 6 (7 last qtr) Sell, according to MarketBeat.com.
  • Insiders sold 163,248 shares over the last three months and sold a net 2,281,229 shares in the past year (source: NASDAQ.com).
  • Tesla shares have a 1-day average price change on earnings of 5.21%. Options are pricing in an implied move of 7.90% off earnings.

Recent News

  • 07/13: Tesla denies rumors of a partnership with Swiss photovoltaics firm Meyer Burger, according to Barron’s.com.
  • 07/11: Morgan Stanley believes bulls are too optimistic that Tesla can flood global markets with electric vehicles. Foreign governments won’t let the company flood their markets, according to Barron’s.com.
  • 07/10: Global Equities thinks worries about the margins on the lower priced Model 3 is a “non-issue” for Tesla. Model 3 has much fewer parts vs. comparable vehicles. Model 3 enjoys superior volume discounts from suppliers. “There is nothing like [the] Model 3 in this price bracket,” according to Barron’s.com.
  • 07/06: Tesla has committed to build the world’s biggest lithium ion battery in the Australian state of South Australia, according to Barron’s.com.
  • 07/06: Loup Ventures analyst Gene Munster thinks the Model 3 will do for autonomous-driving and electric vehicles what the iPhone did for mobile connectivity: bring it to the mainstream quickly, according to a post on Barron’s.com.
  • 07/05: Volvo will stop producing new gasoline-only engines from 2019 and shift to a variety of hybrid and all-electric models, according to Reuters.com.
  • 07/05: Bernstein contends that “Tesla’s Q2 production and deliveries report raised more questions: (1) Why did Tesla put out the release after the market close on the eve of a holiday? (2) If production was so poor in April and May for its 100 kWh battery, why didn’t Tesla executives discuss the issue on the company’s Q1 earnings call on May 3? and (3) Why did Tesla caveat its delivery forecast for the second half of 2017, according to a post on Barron’s.com.
  • 06/22: Tesla is holding discussions with local authorities in Shanghai about building its first manufacturing facility in China, according to Barron’s.com.
  • 06/07: Tesla’s Annual Meeting: Tesla’s production volume is still slated to reach 500,000 vehicles a year in 2018, up from 84,000 in 2016. Tesla plans to add 5,000 new superchargers to its network in both 2017 and 2018, bringing the total number of stations globally to 15,000 by the end of next year, according to Barron’s.com.

Technical Review

Seasonality favors spring and summer. 2017’s push to June’s $386.99 all-time highs follows multi-year consolidation since early 2014 and traders almost always underestimate size and duration of such breakouts. The recent pullback found support at the $304 balance area and resistance is now around $376. (Chart courtesy of StockCharts.com)

Summary

Tesla, Inc. expects to deliver the new Model 3 by late in the second half of 2017. “A severe production shortfall of 100 kWh battery packs” was blamed on the Q2 delivery shortfall and would seem to be a worry ahead of a planned ramp-up in car production. The company has beaten and missed estimates by an average of $0.78 the past four quarters but three of those were misses. Estimize consensus for a Non-GAAP EPS of $(1.73) on revenue of $2.634 bln compares to analyst consensus of $(1.76) on revenue of $2.57 bln. Deliveries guidance is always of interest.

 

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