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Can Tesla Turn Things Around with Q4 Earnings?

Wednesday, October 26, 2016 6:17
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Tesla logoShares of electric car maker Tesla Motors Inc (NASDAQ:TSLA) have struggled this year amid production issues, growth concerns, and a difficult merger. Can Elon Musk’s company turn things around this quarter?

The Palo Alto, California-based maker of the Model S sedan and Model X crossover SUV will deliver its latest results after the closing bell today. Analysts expect the company to report its first quarterly profit in two years on strong revenue growth, but a few other factors will probably steal the spotlight.

Specifically, investors will key in on the company’s upcoming costly acquisition of SolarCity, which recently got the go-ahead from regulators. Tesla CEO Elon Musk is a big investor in SolarCity, and his cousin actually runs the company.

Tesla plans to spend $2.6 billion in stock to acquire SolarCity, and the complexities of combining the two companies will be front and center this evening when Musk fields questions from analysts. What kind of synergies can the two firms actually realize from the merger, and how will those lead to profit and revenue growth? If Tesla can figure out the right answer to that question, the company could be headed toward being a true force not just in the auto industry, but the energy sector as well.

Another big item to focus on during today’s report is vehicle deliveries. Tesla has largely struggled to meet demand for its cars, but hit a milestone of a record 24,500 vehicles delivered last quarter. Back then, the company noted it would indeed hit its target of 50,000 deliveries for the second half of the year, meaning it needs to deliver 25,500 cars for fiscal Q4.

Tesla’s 2017 guidance will arguably be the most important portion of its earnings release today. If nothing else, TSLA is a growth story, so investors and analysts will be looking for strong growth forecasts for 2017 and beyond.

Tied directly to future growth prospects is the company’s progress on its much-anticipated Model 3, a mass market vehicle with a much lower price tag than the luxury cars Tesla has sold thus far. Recently, analysts have called into question whether the Model 3 will be released anywhere near its scheduled target of late 2017, with projections for orders now stretching into early 2018 and beyond. For the company to truly grow into the auto market force it strives to be, it needs that vehicle to be a big hit — and that won’t happen unless it can actually ship the car in a reasonable amount of time.

We’ll have full coverage of Tesla’s latest report after the bell today, so stay tuned.

Tesla shares fell $1.57 (-0.78%) to $200.77 in premarket trading Wednesday. Year-to-date, TSLA has fallen 15.7%.


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