North America

Earnings Preview: Tesla Q4 2016 (TSLA)

By: Craig Bowles

Overview

Tesla, Inc. (TSLA) is slated to report 4Q 2016 earnings after the bell on Wednesday, February 22nd. 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 $(0.35) with a range of $(1.24) to $0.41 (Yahoo! Finance). Consensus was $0.03 three months ago.
  • Revenues: Expectations are for a 25.6% y/y increase to $2.19 bln (range $2.08 bln to $2.43 bln).
  • Deliveries: On 1/3, the company announced they delivered 22,200 vehicles in Q4 vs guidance for “just over 25,000.” (Tesla quarterly deliveries announced a few days after quarter-end will differ less than 1% from the final number.)
  • Deliveries Guidance for 1Q2017: 6,450 vehicles were in transit at the end of Q4, up from Q3’s 5,500.
  • Deliveries Guidance for FY2017: Model 3 production and deliveries are expected late in the second half of 2017.
  • Tesla’s Price/Sales of 6.3 vs a 5-year average of 11.6; Price/Book of 16.2 compares to a 5-year average of 32.9; Price/Cash Flow of 126.2 vs a 5-year average of 133.7.
  • Analysts view Tesla with 12 Buy ratings, 11 Hold, and 6 Sell, according to MarketBeat.com.
  • Insiders bought 2,494,345 shares over the last three months and sold a net 1,536,200 shares in the past year (source: NASDAQ.com). The recent buying into strength is a bit unusual.
  • Tesla shares have a 1-day average price change on earnings of 5.02%. Options are pricing in an implied move of 6.15% off earnings.

Recent News

  • 02/08: Tesla could launch in India this summer, according to Barron’s.com.
  • 01/20: Global Equities Research suggests Tesla’s “competition is totally toast” after mileage increases. Model S 100 D will get a 335 miles range; Model X100 D will get 295 miles; Model 3 will very likely have a range of 300 miles, according to Barron’s.com.
  • 01/19: Morgan Stanley upgraded Tesla to Overweight from Equal Weight and suggests another 25% upside citing a “surprisingly supportive political environment” that contrasts with initial worries of a Trump administration, according to Barron’s.com.
  • 01/19: JPMorgan sees no need to change their Underweight rating on Tesla (the stock is up 35% since early December) citing that estimates appear materially changed (e.g., 2017 EPS falls from -$0.36 prior to a new forecast of -$5.50, and 2018 from +$4.72 to -$1.49), although this almost entirely stems from newly incorporating SolarCity’s large non-GAAP losses, according to Barron’s.com.
  • 01/13: Global Equities Research claims that by fiscal 2020, Tesla’s SuperChargers will add $2.6 billion to revenue, the “majority of which will go directly into Tesla’s bottom line, according to a post on Barron’s.com.
  • 01/13: Baird named Tesla is their “Best Pick for 2017 as investors begin to focus on more important drivers, such as the Gigafactory and Model 3 production ramps, according to Barron’s.com.
  • 01/11: Tesla has promised to begin production of the new Model 3 by the middle of the year, with its first deliveries by year end. Skepticism is probably warranted given recent history, according to Barron’s.com.

Technical Review

Seasonality favors spring and summer. February’s recent $287.39 high is a similar level as July 20, 2015’s $286.65. Timing is odd for a high as the stock normally makes a low in Q1. Point and figure technicians have an upside price objective of $493. (Chart courtesy of StockCharts.com)

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Summary

Tesla Motors has officially renamed itself Tesla, Inc. Tesla is now offering cars with an extended range of 300 miles compared to competitors at less than 100 miles. 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 $1.05 the past four quarters but three of those were misses. Estimize consensus for a Non-GAAP EPS of $(0.04) on revenue of $2.243 bln compares to analyst consensus of ($0.35) on revenue of $2.19 bln. Deliveries guidance is always of interest.

 

 

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