Will There Be Profits? A Guide to Tesla’s Crucial Earnings Call



After the bell, Tesla will reveal the facts of its own fourth-quarter financials — and perhaps offer some visibility. We should get the details of earnings, margins, gains (if any) and money flow at a make-or-break juncture for the industry-disrupting electric-vehicle builder. 

Back in August, Tesla CEO Elon Musk said, “I really wish to emphasize that our goal is to be profitable and cash-flow positive for each quarter moving forward. ”

But this month, even when Musk declared (in the sixth paragraph of an email) that Tesla would be decreasing its workforce by 7%, in addition, he wrote that quarter’s $311 million in gain “has been in part the consequence of preferentially selling higher-priced Model 3 versions from North America. ”

He included, “This quarter, as with Q3, dispatch of higher-priced Model 3 versions (this time into Europe and Asia) will allow us, with good difficulty, effort and some luck, to aim a very small profit. ”

So profits and margins will fall despite rising earnings.

What to look for in this revenue phone

During the earnings call, Tesla and its own CEO are likely to confront numerous problems that are important. 

Capital conditions: Including the effect of the $920M convertible bond finishing on March 1, the Shanghai mill, Model Y crossover growth, as well as the ramp of the Solar Roof, the Semi truck, the newest Tesla Roadster, along with the pickup. Additionally on the to-do list is a refresh for the Model S and Model X. 

The charger network will need to be built out to accommodate the volumes of EVs rolling off of Tesla&rsquo. Along with service centers along with components  inventory will need to scale with all the brand’s growth as well. 

Model 3 demand: Tesla pulled all the stops to provide last quarter to a list 90,700 cars. But the very first quarter of 2019 could suffer with the hangover of the shipping pull-in. Tesla has started its Model 3 shipping efforts from Europe and China, but faces the headwinds of tariffs, homologation, new supply networks, along with transport. Many Model 3s were sent in January?

According to the thesis of this short-seller community, U.S. Model 3 backlog was drained in the fourth quarter. Q4 2018 will serve as the summit for Tesla revenues, deliveries and GAAP profit, in accordance with many of the shorts, also Q1 2019 will be a disappointment. 

Model Y schedule: In October of this past year, Musk claimed”significant progress” on the Model Y, Tesla's crossover. The CEO reported that he”approved the prototype to go into production” and expects it to be in volume production in 2020. Tesla is expected to unveil the Model Y in the first half, or perhaps the first quarter, of this year. 

S and X demand: Sales development is flat, with roughly 100,000 units of these 2 models combined sold annually. What’s the future of these luxury models?

Tesla made workforce cuts into the production crews of its luxury Model S and X vehicles, according into CNBC, which reports the EV builder has also halted late-shift creation of these models at the Fremont mill. 

Other essential things: Musk might want to deal with standing of Full Self Driving, the truth of an inexpensive $35,000 Model 3 (when production cost is roughly $40,000), as well as the usage and fate of the Buffalo plant.

Paying for all this capex

Morgan Stanley analysts expect a multibillion-dollar funds  increase, even though Musk's difficult-to-explain decision not to go this path. 

Low-interest loans from China might finance the mill; billions in deposits to its Model 3 and Model Y in China and Europe could finance Model Y growth; along with the authentic corporate gains that Musk expects on a quarterly basis from here on in will even bring about Tesla’s growth.

There are also securities. Late last year, Tesla issued $837 million in its own second issuance of securities backed by Tesla automobile leases, according to Auto Finance News.

Stay prepared for synergistic results

Tesla and Elon Musk have established a dominant and pioneering position in the American EV marketplace and the European luxury auto market.

According to Automotive News, the Model S outsold the range-topping sedans from Mercedes, BMW and Audi within their European home markets in the first 10 weeks of 2018. Tesla owns almost half of the U.S. plug-in EV marketplace, and a decent portion of international revenue for plug-in EVs, according to Inside EVs. 

And Tesla is not confined to EV marketplace dominance — the firm has a advantage that is technical that is marked .

Sandy Munro’s automobile engineering consultancy performed a breakdown and analysis of Tesla's Model 3 final year. Within an interview published on industry site Autoline Daily, Munro found that although Tesla includes a “really heavy, expensive” human body in snowy  (an industry term for its standard sheet-metal arrangement of the automobile ), he cares about the other programs, stating that its electronics, wiring harnessesand suspension, and cooling and battery significantly simplifies the industry’s status quo. 

But Tesla may ’t rest on these achievements — executing production, cost, quality and require production are the existential problems facing the firm this and next quarter.   

As Musk said,  the business wants”to keep on making progress toward lower-priced versions of Model 3. ”

That’s the version with a couple hundred thousand customer deposits. 

Bloomberg's Tesla tracker shows Model 3 generation levels at a trailing 13-week typical of 5,280 automobiles per week, while logging a current week with over 6,000 units constructed.

We’ll report this crucial call after the bell Wednesday afternoon. 


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