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Tesla Earnings: What Might Be Expected for Q2?

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August 2, 2017
Tesla vehicle being charged
iStockphoto.com/wakila

Electric automaker and energy company Tesla (TSLA) reports second-quarter earnings on August 2 after the closing bell. And just recently, the company started delivering the first Model 3 cars fresh off the assembly line.

Now that it has started delivering the new car, which Tesla has touted as its affordable electric vehicle, it has started to focus on ramping up production. According to the company’s plans, it will start with low volumes with the goal of producing 5,000 units of the Model 3 per week by the end of December. Tesla has said there are roughly 400,000 reservations for the new vehicle and a 12 to 18 month wait, so analysts will likely be looking for more information on its earnings call about the timeline for production and deliveries.

In the past, Tesla has repeatedly pushed back production and delivery schedules on its Model S and Model X lines, citing problems ranging from autopilot software to shortfalls in battery production. Bearish analysts have often pointed to past production problems as a reason for their skepticism regarding the company’s ability to meet its future targets. 

When it released production and delivery figures for the second quarter in July, which were only for the Model X and Model S, the company said “the major factor affecting Tesla’s Q2 deliveries was a severe production shortfall of 100 kWh battery packs”. Despite the manufacturing challenges, Tesla delivered just over 22,000 vehicles during the period, bringing the total for the first half of 2017 to 47,100.

Ramping up production hasn’t been cheap, and since Tesla hasn’t been profitable, analysts appear to be keeping an eye on the company’s cash burn to see if it might need to raise more cash to operate. Earlier in the year, management said it would need to spend $2 to $2.5 billion to launch the Model 3. And in March this year, Tesla announced it had raised an additional $1.2 billion through an offering of equity and convertible notes to support the Model 3 production. 

Beyond the company’s electric vehicles, investors and analysts will likely be looking for additional details regarding its integration of SolarCity into Tesla Energy, as well as the new solar roofs and new, exclusive solar panels made by Panasonic. 

Tesla stock ytd performance charted on thinkorswim trading platform

FIGURE 1: JULY DELIVERY HIT.

Tesla’s (TSLA) stock hit an all-time high of $386.99 on June 23, but has dropped quite a bit since then, suffering its biggest drops in early July when it released vehicle production and delivery figures for Q2 that were at the low range of estimates. After those July drops, the stock is up 47.27% year to date. Chart source: thinkorswim® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Tesla Earnings and Trading Activity

For the second quarter, Tesla is expected to report a loss of $1.94 per share, larger than the loss of $1.06 per share reported in the prior-year period, on revenue of $2.54 billion, according to Wall Street analyst estimates. Revenue is expected to grow 63% year over year, but estimates are slightly below the $2.7 billion in revenue reported in the first quarter. 

Options traders have priced in about a 6% potential share price move in either direction around its upcoming earnings release, according to the Market Maker Move indicator on the thinkorswim® platform. In short-term trading at the August 4 expiration, calls have been active at the 340 strike price and puts have been active at the 300 strike. As of this morning, the implied volatility is at the high end of the range at the 90th percentile. Looking at the charts, the stock appears to have some support at the $310 level.

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.

Looking Ahead

Earnings have been the big thing dominating headlines, but we’ve also got the jobs report coming out on Friday on top of all the other economic data released this week. If you have time, make sure to check out today’s market update to see what else is happening.

Good Trading,
JJ
@TDAJJKinahan

NC
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