Patrick Fallon / Reuters
- Tesla reports its earnings on Wednesday, and analysts expect the company to swing to a loss after two straight profitable quarters.
- CEO Elon Musk said earlier this year that Tesla probably wouldn’t post a profitable Q1, and markets have been pricing in a loss.
- Topline revenue could also reverse an upward trend, after breaking through $7 billion for Q4 2018.
- Tesla might also have sold emissions credits to mitigate the loss.
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Tesla reports first-quarter earnings after the bell on Wednesday. After a second half of 2018 in which Tesla finished in the black, Wall Street is expecting a money-losing quarter. The loss has been pegged at anywhere from less than $1 per share to nearly $2.
Tesla shares are down about 14% year-t0-date, and CEO Elon Musk already said that the company won’t post three straight profitable quarters. Markets appear to have priced in the negative result, as share are actually up marginally over the past month.
With this knowledge, investors should be zeroing in on three key aspects of Tesla’s numbers:
1. Revenue, revenue, revenue
For the fourth quarter of 2018, Tesla brought in more than $7 billion, a serious topline surge. Despite Tesla’s volatility on the bottom line, the company is starting to rake in serious money.
That makes sense. Tesla delivered around 250,000 vehicles in 2018. Those vehicles were priced between $50,000-$150,000. Carmakers enjoy huge amounts of cash sloshing through their businesses, and now that Tesla has captured about 3% US market share, it can expect the same.
That said, revenue should retreat for Q1. The big questions is, "How much?" Investors will want to see if Tesla can regain topline momentum and start looking forward to $10-billion quarters.
Tesla paid off a roughly $900-million convertible bond earlier this year, depleting some of its cash balance, which was north of $3 billion. The expectation is that operations will send Tesla’s cash reserve down to about $1 billion by the end of the year, which is skinny for an automaker and could presage a capital raise at some point in 2019 to cushion the balance sheet.
3. Emission-credit sales.
Tesla amasses zero-emission-vehicle (ZEV) credits because it sells only all-electric vehicles. (Tesla also racks up non-ZEV credits that are calculated on different metrics than ZEVs.) It can sell these at any time, bringing in millions.
Musk has complained about how various ZEV schemes end up discounting Tesla’s ZEVs, but they still represent a useful revenue source, and Tesla hasn’t really tapped them since last year. Investors will likely be curious about whether Tesla sold some credits to offset an otherwise more severe loss.
On another note, investors will also be listening in to Tesla’s earnings call after the numbers are announced to assess the interactions of outgoing CFO Deepak Ahuja and incoming CFO Zach Kirkhorn, who will take over the position toward the end of 2019.
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