Tesla profits under pressure next week: will a loss put an end to its stock market recovery?


Tesla Inc.’s second quarter results are part of yet another massive rally for the stock, which is now more expensive than stocks from Google, parent company Alphabet Inc. and other still profitable heavyweights.

The Silicon Valley automaker is expected to release quarterly figures next Wednesday after the bell. A call with analysts at 5.30pm will follow.

Tesla TSLA,
+ 2.58%
The shares were heading for a new record on Monday. The rally has quadrupled the share price this year and brought the automaker’s market value to $ 325 billion.
This makes Tesla the most popular automaker in the world after the Japanese Toyota Motor Co. TM,
+ 0.73%,
which sold more than 10 million vehicles last year, including 2.4 million in North America.

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Wall Street calls for Tesla’s second quarter GAAP and adjusted quarterly losses, but that did not stifle the hope that Tesla could surprise the markets with quarterly profit, which would put the stock on track to join the company. S&P 500 index in three to six months. One of the criteria for inclusion in the index is GAAP profitability for four consecutive quarters.
Joining a major index would get Tesla stocks in the portfolios of thousands of index funds and also send managed funds to catch up.
Here’s what to expect:
Gains: The consensus of 33 Wall Street analysts polled by FactSet calls for a GAAP loss of 1.34 cents per share, which would be comparable to a GAAP loss of $ 2.31 per share in the first quarter of 2019. Analysts expect to an adjusted loss of 58 cents per share, which would compare to an adjusted loss of $ 1.12 per share a year ago.
Estimize, a crowdsourcing platform that collects estimates from Wall Street analysts, as well as buy-side analysts, fund managers, business leaders, academics and others, expects adjusted earnings of 6 cents per share.
Returned: Analysts polled by FactSet expect sales of $ 4.8 billion for Tesla from $ 6.4 billion a year ago. Estimate forecasts revenue of $ 5.4 billion for the company.
Movement of stock: So far this year, Tesla stocks have gained 300%, a stark contrast to losses of around 7% for the Dow Jones Industrial Average DJIA,
+ 1.17%
and break-even point for the S&P 500 SPX Index,
+ 0,28%
in the same period.
What else to expect: A clearer picture of the impact of the coronavirus pandemic on the business will likely emerge with the quarterly results.
For most of the three-month period, Tesla’s only U.S. car manufacturing plant in Fremont, California was shut down (and became a subject of contention between general manager Elon Musk and authorities local sanitary facilities, factory reopening against closure orders), production at Tesla’s Shanghai plant offset some of the effects of the Fremont closure.
The equity rally, which started in December, recently picked up pace after the company announced better-than-expected second-quarter sales earlier this month without Fremont at full speed.
The valuation of the stock is probably “dislocated from traditional valuation measures,” Evercore ISI analysts said on Monday in a note.
Tesla could “arm” it and opt for another capital increase, although it did so last February, they said. The money could be used to improve her balance sheet and increase her capacity faster.
More clarity on the pace of production and delivery of the Model Y is also high on the list of investors for the quarter.
See also:Tesla stock soars as quarterly sales crush expectations
Tesla has combined production and sales in the second quarter of model Y, a compact SUV, with that of model 3, claiming that it had sold 80,050 and produced 75,946 of the two, the vast majority being models 3.
In addition to the focus on demand for the Y model, Wall Street is required to analyze any mention of the 2020 sales targets.
Tesla in April said it had “installed capacity” to deliver more than half a million vehicles in 2020 “despite the announced production interruptions.”
Evercore ISI analysts changed their expectations for 2020 deliveries to 460,000 vehicles on Monday from their previous expectations of 435,000 vehicles. The FactSet consensus plans to sell 435,000 units this year.
Another potential catalyst for stocks is around the corner, and Tesla could provide more details on the call. Tesla has set its “battery day” for September 22 in conjunction with its annual shareholders’ meeting. The company is expected to unveil a “million mile” battery and present advances that would comfortably place it ahead of the competition.
Battery technology innovations “remain the key ingredients for Tesla’s success on the battery front and we believe the company is nearing the announcement of a million kilometer battery,” said Dan Ives of Wedbush in a recent note. Such a battery could “last for decades, withstand all types of weather / terrain and be another important step for the Tesla ecosystem”.


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