TSLA Reports After Wednesday's Close, Still All About the Model 3

Electric vehicle maker and energy company Tesla (TSLA) reports Q1 earnings after market close on Wednesday, May 2. Here’s a look at what might be expected from its report.

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Tesla (TSLA) reports first-quarter earnings after market close on Wednesday, May 2. As has been the case in previous reports, analysts have been squarely focused on the Model 3.

Since Model 3 deliveries began, the company’s mass-market vehicle has taken some attention away from the Model S and Model X, which still make up a bulk of its deliveries. Here’s a quick recap of the TSLA’s Q1 production and deliveries that the company announced in early April:

  • Q1 deliveries totaled 29,980 deliveries. Of those deliveries, 11,730 were Model S, 10,070 were Model X and 8,180 were Model 3.
  • Q1 production totaled 34,494 vehicles. 24,728 of the vehicles produced were Model S and Model X, while 9,766 were Model 3.
  • 4,060 Model S and Model X, as well as 2,040 Model 3 vehicles, were in transit to customers, to be delivered in early Q2.

Model 3 production has been ramping up, coming in at around 2,000 vehicles per week based on the company’s April statement. That’s still well short of the 5,000 per week production targets the company had set shortly after the launch of the car. When it last reported, TSLA said it plans to produce 2,500 Model 3 per week by the end of Q1, and 5,000 Model per week by the end of Q2.

Model 3 production has taken longer than TSLA anticipated to ramp up, resulting in growing concerns among analysts that the company will need to raise additional capital, something CEO Elon Musk denied in a recent tweet when he said TSLA would be profitable and cash flow positive in Q3 and Q4. Some analysts have modeled that the company will need to raise around $2.5 billion in additional capital in the second half of the year.

Another area that analysts and investors have been looking for additional clarity in is net Model 3 reservations. Other than some initial figures provided shortly after the vehicle’s launch, TSLA hasn’t provided too much additional information. When TSLA reported Q1 production and deliveries, it noted that “net Model 3 reservations remained stable through Q1,” and that order cancellations have been “almost entirely due to delays in production in general and delays in availability of certain planned options.”

Tesla Earnings and Revenue Estimates

For Q1, TSLA is expected to report an adjusted loss of $3.37 per share on revenue of $3.17 billion, according to third-party consensus estimates. In the same quarter last year, TSLA reported an adjusted loss of $1.33 per share on revenue of $2.7 billion.

On a sequential basis, analysts have projected that TSLA’s revenue to drop from the $3.29 billion the company reported in Q4 2017, and its loss is expected to widen from $3.19 per share. There usually isn’t a whole lot of variance between analyst’s revenue estimates and TSLA’s top-line results, whereas earnings estimates have ended up well above or well below the company’s actual results by a wide margin.  

Tesla 2018 Stock Chart

DOWN IN 2018.

TSLA has continued to experience major news amid reports of ongoing supply chain challenges the company has had while ramping up Model 3 production. The stock has been trading around the $300 after recovering a bit from its recent low of $244.59, a level it hasn’t seen since early 2017. Chart source: thinkorswim® by TD Ameritrade.  Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Tesla Options Trading Activity

Around the upcoming earnings release, options traders have priced in about a 6.2% stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. Implied volatility was at the 66th percentile as of this morning.

In short-term trading at the May 4 weekly expiration, calls have been active at the 300 and 310 strike prices, while puts have been active at the 280 and 290 strikes.

At the May 18 monthly expiration, calls have been active at the 300 and 320 strikes, while activity on the put side has been concentrated at the 280 strike. The 250-strike put, a ways out of the money, also saw heavier trading during yesterday’s session.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

What’s Coming Up

Earnings season has started to wind down a little, however, there are still quite a few major companies left to report. Activision Blizzard (ATVI) and Alibaba (BABA) are scheduled to report later this week. Over the next few weeks, Nvidia (NVDA), Home Depot (HD), Wal-Mart (WMT) and Deere (DE) are on tap to report.

On the economic data front, the next major thing coming up is the April employment report, due out Friday morning. For a look at what else is going on, check out today’s market update.

Good Trading,
JJ
@TDAJJKinahan

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