Tesla Tops Q1 Estimates; Shares Fall After Musk’s Unusual Call

Published on: 03 May, 2018

Tesla Inc. (NASDAQ: TSLA) reported its first quarter financial results and topped analysts’ estimates in both revenue and earnings, although net losses increased. Shares rose during after-hours on Wednesday, but shortly after Tesla CEO Elon Musk gave a very unusual earnings call, shares plummeted.

Tesla shares opened 7.4 percent lower on Thursday.

For the first quarter, Tesla reported record revenue of $3.41 billion, increasing 26.3 percent year over year and topping analysts’ estimates of $3.3 billion. The company also reported record high net loss of $784.62 million or an adjusted EPS loss of $3.35, beating analysts’ forecast of a $3.53 loss per share.

In the quarter, Tesla said it ramped up Model 3 production in the second half of the quarter, driving momentum into the second quarter. Tesla said in the statement production increased to over 2,000 Model 3 vehicles per week for three weeks straight, delivering a total of 8,182 in the quarter.

Tesla said if it is able to achieve 5,000 Model 3 vehicles production per week, it will be able to achieve positive net income in the third and fourth quarter and also expecs achieve full GAAP profitability in those quarters, but its all dependent on the Model 3 outcome.

“Once we hit the 5,000 per week milestone, we intend to incorporate our earnings to continue to increase output on our existing manufacturing lines beyond 5,000 units per week, and then in a capital efficient manner to add incremental capacity to ultimately get to a 10,000 unit weekly rate.” said Tesla.

Tesla will produce around 5,000 Model 3s per week for the meantime, but production will ramp while also working to slash expenses. Tesla says once its new factory is built in Germany, it will significantly lower manufacturing costs.

Tesla said its long-term gross margin target of 25 percent for Model 3 has not changed. In the medium term, it expects to achieve slightly lower margin due to higher labor content, but Tesla expects higher gross profit per vehicle than previously expected.

The company expects capital expenditures to be slightly below $3 billion for 2018, lower than the previous year of $3.4 billion. Again, just like the company’s profitability, its expenditures will rely on the Model 3. Interest expenses in the second quarter will amount to approximately $160 million.

Although Tesla provided a forecast of growth and profitability, as well as topping estimates for the quarter, Musk changed the promising guidance in the earnings call. His answers made investors and analysts concerned because it seemed more like he was avoiding the topic by playing it off.

When asked about Tesla lowering its capital expenditures for the year, Bernstein analyst Toni Sacconaghi asked where the company will be in terms of capital requirement, Musk retorted back with: “Excuse me. Next. Boring, bonehead questions are not cool. Next?”

Afterwards, RBC analyst Joseph Spak asked about Model 3 reservations and how many customers were configuring their vehicles, Musk responded by saying: “We’re going to go to Youtube. Sorry. These questions are so dry. They’re killing me.” Musk’s comment about going to Youtube was regarding a user on the platform, who contacted Musk before the call to ask questions on behalf of retail investors.

Then to top it off, Musk said to Baird analyst Ben Kallo with: "We have no interest in satisfying the desires of day traders. I couldn't care less. Please sell our stock and don't buy it."

Tesla shares have fallen 9.6 percent this year.


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Danny Abramov

Email: danny@financialinsiders.com


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