Tesla's Earnings Report Draws More Attention to Output Than Loss

Tesla Earnings: Market Likes What Elon Musk Said
  • Analysts eager for details on Model X SUV production progress
  • Company had set target of at least 50,000 deliveries in 2015

When Tesla Motors Inc. releases third-quarter financial results after the market closes Tuesday, analysts and investors will be focused on how production of the Model X sport utility vehicle is going -- and if it is increasing fast enough to get Tesla to its ambitious target of delivering at least 50,000 autos this year.

The Palo Alto, California-based maker of electric cars and energy-storage devices may report an adjusted loss of 56 cents a share, the average of 16 analyst estimates compiled by Bloomberg. Revenue is projected to rise to $1.24 billion, a 33 percent increase from a year earlier.

Tesla's Model X SUV
Tesla's Model X SUV
Photographer: David Paul Morris/Bloomberg

Tesla turned over the first six Model X SUVs to board members and close friends of the company Sept. 29, but has been quiet about the number delivered since then. Combined with downgrades from three analysts, there’s been an uptick in bearish sentiment. Though Tesla rose 3.3 percent Monday to $213.79, that level was still more than $34 below its $248.40 close Sept. 30, the day after the Model X delivery event. The Model S last month lost its recommendation from Consumer Reports after owners complained about quality issues as mundane as a squeaky sunroof to major issues like the electric motor needing to be replaced, the publication said in its forthcoming December issue.

“Sentiment is 2015 deliveries will come in near low end of guidance (and guidance could potentially be lowered) with low Model X volumes,” said analyst Ben Kallo of Robert W. Baird & Co., who has a neutral rating on the stock, in a preview note. “We need to see a few thousand Model X vehicles produced before we gain comfort in TSLA’s production ability.”

Musk has been candid about the challenges of the vehicle’s complex and distinct features, including the “falcon-wing” doors, independently operable second-row seats and large, panoramic windshield, not to mention reliance on suppliers. Tesla has delivered 33,157 cars through the first three quarters, according to a preliminary tally, which would mean it must deliver 16,843 vehicles in the final three months of the year to reach the low end of its guidance of 50,000 to 55,000 vehicles.

Skepticism has been rising despite the fact that Tesla released the first of its autopilot features -- to the cheers of owners, such as talk-show host Stephen Colbert -- a key step on the path to full autonomous driving.

Beyond the Model X and full-year guidance, analysts are looking for Chief Executive Officer Elon Musk to bring them up to speed on several other aspects of the business, including:

TESLA ENERGY: When Tesla unveiled its suite of energy-storage products for homes, businesses and utilities in April, initial deliveries of the Powerwall home battery were scheduled to begin in late summer. Tesla’s website now says that will happen “in late 2015.” Any updates on Tesla Energy will be of interest, including progress on the Gigafactory under construction outside of Reno, Nevada, and possible battery partners in addition to Panasonic Corp.

MANAGEMENT: As Tesla grows and expands, it will need to deepen its management bench and hire for key positions. Chief Financial Officer Deepak Ahuja announced at the shareholders’ meeting in June that he would retire once a replacement is found. Jerome Guillen, vice president of worldwide service and deliveries, is on an extended leave of absence.

CHINA: Tesla has sold 3,025 cars in the first nine months of the year, and recently won approval from the Beijing municipal government to enter a special license plate lottery system for electric vehicles. Musk recently visited China and may comment about progress in the world’s largest auto market.

MODEL 3: Tesla’s lower-priced Model 3 is currently slated for late 2017. Tesla’s foray into more mass-market manufacturing is a huge test for the company. Any delay -- or reassurance -- of that timeline would be of intense importance.

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