* Reports 3Q 2019 results on Wednesday, October 23 after the close
* Revenue expectation: $ 6.47 billion
* EPS expectation: ($ 0.45)
Tesla (NASDAQ 🙂 has fought a tough fight in an attempt to reverse the negativity that has devastated its shares for months and cast dark shadows over its once bright future. When the pioneering maker of electric cars & # 39; s today reports his third quarter, he has to prove that he wins the fight.
The biggest challenge for the ambitious but controversial CEO of the company, Elon Musk, is to show that the company can make sustainable profits when car sales improve.
Earlier this month, Tesla reported that it delivered a record of 97,000 units in 3Q, including 79,600 Model 3 sedans, plus 17,400 of the more expensive Model S cars and Model X crossovers. The company's statement did not state whether it still expected the 360,000 to 400,000 vehicles it had predicted this year. It will have to sell another 105,000 cars in the last three months of the year to reach the low point of that forecast.
But the encouraging delivery report of October also contained bad news. Many analysts believe that more sales of the cheaper Model 3 sedans probably affected revenue in the third quarter, making Musk & # 39; s goal of achieving profitability more elusive. Model 3 sedans, starting at $ 38,990 in the US, are less than half the cost of the cheapest Model S or X.
Shares under pressure
These concerns have kept Tesla's stock under pressure throughout the year. It drops by around 25% for the year to $ 255.58 by the end of yesterday, but it has recovered nearly half of its losses since June when it traded 46% lower.
If the consensus forecast from analysts is correct, Tesla will today report a third, straight quarter of the losses, while revenue could fall to $ 6.47 billion in the same period a year ago when the company generated revenue of $ 6 8 billion. Analysts at Credit Suisse and RBC Capital Markets are among the predictors that Tesla will have lower sales in the third quarter than a year ago. If that happens, it's been a first for the company since 2012 – the year in which the Model S started production.
In our opinion, the most important detail in this income report is information about the automaker's drive to control costs. In the short term, that is one of the most important factors that can improve the net result and keep more money in Tesla's cash in order to continue the expansion.
Bottom Line
Tesla's share is a good example of an investment where you have to choose between growth and cash flows. Elon Musk's mission to produce an economical electric car is an admirable and noble goal, but it is not clear how long it will take for the company to start making a profit and rewarding its investors.
Tesla & # 39; s premium ratings compared to other automakers will only be justified if Musk can prove that the company can deliver more cars and also earn money. Due to these ongoing concerns, we are not yet ready to change our negative view of Tesla, despite the positive surprise about deliveries this month.
