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Tesla misses on 2Q earnings but says it's still on track to profitability by the second half of the year

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Tesla Inc (NASDAQ:TSLA) announced mixed results in its eagerly awaited second-quarter earnings Wednesday, but stood its ground on guidance, expecting to be profitable and cash-flow positive by the second half of 2018.

The electric-car maker reported a net loss of US$3.06 per share on revenue of US$4bn compared with a net loss of US$1.33 per share on revenue of US$2.79bn in the previous year’s second quarter.

Shares of Tesla jumped more than 4.5% to US$315 in Wednesday after-hours trading.

The California-based company fell below Wall Street estimates of a net loss of US$2.88 EPS but beat revenue expectations of $3.92bn.

The real focus for investors is on profitability.

High hopes for Tesla

CEO Elon Musk has predicted Tesla will reach profitability and generate cash flow by its third quarter and reiterated his belief in the quarterly results, but analysts have yet to express the same confidence.

Morgan Stanley analysts disagreed with Musk’s timeframe and don’t foresee a positive GAAP net profit until 2021.

Musk has taken to Twitter to assure investors that Tesla will not need to raise capital, but the analysts aren’t buying that either. Tesla has been burning cash at a rate of around US$1bn per quarter.

READ: Tesla asks suppliers to return cash to meet its profitability goal

With plans to build Gigafactory 3 in Shanghai, the cash burn isn’t expected to slow down

However, the automaker ended the quarter with US$2.2bn cash on hand. It expects to spend less than US$2.5bn in capital expenditures in 2018.

“If Tesla can get through 2018 without raising equity, it would represent a material upside surprise to investors,” wrote the analysts in a June note. The analysts foresee Tesla raising US$3bn at US$280 per share by the third quarter of 2018.

However, the analysts had also said that the company wouldn’t meet its 5,000 per week production goal until 2019 and that has since been disproved.

Production forecast

Tesla has already given investors a heads up on its production capabilities, announcing in July that the company met its production goal of 5,000 Model 3 cars per week despite mounting obstacles, including manufacturing issues and fatal crashes.

“Now that we have reached a production rate of 5,000 Model 3 vehicles per week, we are focused on further ramping production, and achieving profitability and continuous cost efficiencies,” said the company in a letter.

READ: Tesla’s Gigafactory 3 in Shanghai to start production in two years

Tesla expects to produce 50,000 to 55,000 Model 3 vehicles in its third quarter.

Model S and Model X deliveries are also expected to rev up in the second half of the year.

A call for concern

Elon Musk is undoubtedly the face of Tesla and his bizarre behavior, especially his late-night Twitter outbursts, have been a cause for concern for some investors.

Most recently, Musk apologized after angrily tweeting at a British diver involved in the rescue of the trapped boys in Thailand. When diver Vern Unsworth referred to Musk’s offer of a mini-submarine as nothing but a publicity stunt, the CEO called him a “pedo” and said he could prove it would work

In last quarter’s post-earnings call, Musk cut off analysts’ questions and told investors to stay away from the stock if they couldn’t handle volatility.

Musk then defended his position via Twitter, saying that the analysts he ignored were “sell-side analysts who represent a short seller thesis, not investors.”

Tesla’s earnings call will begin at 5:30 pm EST.

Story by ProactiveInvestors


Source: http://www.proactiveinvestors.com/companies/news/202042/tesla-misses-on-2q-earnings-but-says-it-s-still-on-track-to-profitability-by-the-second-half-of-the-year-202042.html


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