Tesla misses on bottom line, but says it will be profitable in second half

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Tesla Motors CEO Elon Musk unveils large utility scale home batteries at the Tesla Design Studio in Hawthorne, California, April 30, 2015. 


Published 41 Mins Ago

Updated 2 Mins Ago

Elon Musk, co-founder and chief executive officer of Tesla Inc.

Tesla reported quarterly earnings that missed analysts’ expectations on Wednesday, but revenues that beat estimates.

Here’s how the company did compared with what Wall Street expected:

  • Losses: -$3.06 per share vs. -$2.92 per share forecast by Thomson Reuters
  • Revenue: $4.00 billion vs. $3.96 billion forecast by Thomson Reuters

Shares rose nearly 5 percent after hours on the news. Tesla reaffirmed it will be profitable in the second-half of the year.

Automotive gross margins increased to 20.6 percent. Model 3 gross margins turned slightly positive in the second quarter and Tesla expects Model 3 margins to be 15 percent in the third quarter.

Tesla expects to produce 50,000-55,000 Model 3s next quarter, and deliveries should exceed that number.

The company also said it completed its major cost restructuring plan in the second quarter, a big step in its plan to become profitable.

Tesla had $2.2 billion in cash on hand at the end of the quarter, and expects its cash reserves to grow in the second half of the year.

It also now expects to spend less that $2.5 billion in capital expenditures in 2018.

This quarterly update is a crucial one for Tesla. Investors have growing concerns about the sustainability of Tesla’s profits, the reported quality problems with its cars, and overall demand for the Model 3, which is the company’s biggest bet by far.

Tesla said it produced 53,339 vehicles in the second-quarter and delivered 22,319 Model S and Model X vehicles and 18,449 Model 3 vehicles, totaling 40,768 deliveries.

The company said in July it was able to repeatedly hit its target of producing 5,000 Model 3 vehicles per week. Having accomplished that goal, the company is now aiming for a 6,000 vehicle per week rate, which it hopes to achieve by the end of August. By the end of the year, it hopes to ramp up to a rate of 10,000 per week.

Production, though, is many months behind schedule and the company has resorted to setting up assembly lines in temporary tent structures.

There are also concerns about quality issues with the cars. Current and former employees have complained that Tesla is producing a high ratio of flawed parts and vehicles as it rushes to ramp up output.

The company burned through about $700 million in the quarter, a drop from the more than $900 million it spent in the first quarter.

Many analysts think the company will have to raise fresh capital by the end of the first quarter of 2019. Tesla seems to have taken another step toward getting its finances in line by recently hiring a new chief accounting officer.

Tesla has also courted controversy in recent months due to the erratic behavior of Chairman and CEO Elon Musk. On a conference call discussing its first-quarter earnings, he called questions posed by analysts “boring, bonehead questions,” and more recently caused a stir with some off-color comments on Twitter. Some investors worry Musk’s online presence risks alienating fans and potential customers, and distracts investors and employees from Tesla’s basic goals.

This is breaking news. Please check back for updates.

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