What to expect from Tesla earnings: Updates on the Model 3, cash burn
A day after his private venture successfully launched a rocket into space, Elon Musk will face more earthly concerns when his public electric-car company, Tesla (TSLA), reports its latest earnings after the close of trading on Wednesday.
Investors will particularly be zeroing in on Tesla's deliveries, as vehicle sales make up the bulk of the company's revenue, as well as the number of vehicles in production.
Tesla is banking on the more affordable Model 3 sedan as it tries to move from a high-end niche player to a mass-volume manufacturer. The attempted transition has not been an entirely smooth one, with Tesla falling short of production targets as it dealt with unexplained issues at an assembly plant in California and its Gigafactory in Nevada.
The company last month said it anticipated a slower ramp-up in production through the first quarter, with its goal of producing 5,000 vehicles a week expected by late June,putting it three months behind prior guidance.
People should put the hype about Tesla in perspective given the company's "very limited production capacity," Morningstar analyst David Whiston wrote in a client note.
"Musk said in May 2016 that his best guess for 2020 output is 1 million vehicles, but we think that will certainly not all be in California. We are skeptical oft his number, given Tesla sold about 76,000 vehicles globally in 2016," the analyst added.
Beyond investors, Tesla's output projections should be of interest to hundreds of thousands of consumers who plunked down $1,000 deposits beginning nearly two years ago to reserve Model 3s.
Those deposits helped Tesla generate $686 million in revenue at the end of the third quarter -- a period in which the car manufacturer also tore through $1.42 billion in cash.
Tuesday's SpaceX Falcon Heavy launch could be likened to the Tesla Model 3 launch, which will be the main focus when the company releases its numbers, according to Barclays analysts Brian Johnson, Dan levy and Steven Hempel. The amount of rocket fuel burned in a launch originally planned for 2013 is akin to the Model 3 launch in that both burn through lots of cash, the Barclays analysts wrote in a note.
"Indeed, in our Tesla model for 2018 we forecast a $1.3 billion decline in cash – even inclusive of our forecast for a $2.5 billion equity raise."
The car maker's third-quarter earnings mostly disappointed investors, with its earnings loss larger than expected and coming amid concerns over Tesla's delay in reaching its Model 3 production goals.
"Although we stress the uncertainty in investing in Tesla today, the company's competitive position is better than some may expect from a tech startup that makes automobiles," Morningstar's Whiston said.