Reports second quarter 2020 results on Wednesday, July 22, after the market closes
Yield forecast: $ 5.15 billion
EPS expectation: $ -0.14
When Tesla (NASDAQ 🙂 reports its quarterly figures later today, the electric vehicle maker will have little room to disappoint. For investors it is a foregone conclusion that CEO Elon Musk will succeed.
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These expectations, which caused Tesla shares to skyrocket this year, were fueled by a remarkable turnaround for the Palo Alto, California-based auto maker. The main factor that caused this enthusiasm? Shareholders are beginning to believe that Musk's goal of selling electric cars for more than the cost is becoming achievable.
A recent email to employees of the CEO indicated that Tesla was about to produce a possible break-even quarter, during a time when the main Tesla plant in California was closed for much of the spring by the pandemic.
Unlimited stock dynamics were further compounded by the company's quarterly results released early this month, which revealed that Tesla delivered 90,650 cars to customers in the three months ended June, which is the average analyst estimate exceeded approximately 83,000.
All these positive developments have contributed to Tesla's amazing run this year. The stock reached a record high of $ 1,794.99 on July 13, yielding returns of more than 500% in the past 12 months, making it the world's most valued auto maker. Tesla shares closed at $ 1,568.36 yesterday. The stock is now trading at 182 times estimated profit over 12 months, versus 10 times for General Motors (NYSE :).
Small Profits Possible
According to Barclays Analyst Brian Johnson, Tesla is likely to make a profit for the second quarter, held back by the money the company makes from selling tax credits. Those credits helped the company make a profit of $ 16 million in the first quarter when analysts expected a loss.
The consensus estimate for the second quarter is nevertheless a quarterly loss of $ 0.14 per share, but that number has narrowed in recent weeks and would represent a significant improvement year-over-year, according to FactSet data. Quarterly sales are expected to decline 19% to $ 5.15 billion.
Another important detail that we believe will have a greater impact on Tesla's future performance is the company's forecast for auto deliveries in the second half of this year.
Tesla cut prices for its cars in the second quarter, followed by a recent price drop for its Model Y, indicating that the company is still experiencing weak demand during the pandemic.
That environment, if it lingers, will make Musk's goal to increase deliveries by more than 36% this year. In April, Tesla did not confirm its previous forecast for car deliveries and said it would update the second quarter results.
Bottom Line
After a breathtaking rally this year, Tesla shares are in our opinion susceptible to a small negative surprise.
Tesla's valuation remains impossible to justify by any standard measure, and clearly demonstrates the herd mentality of both private and institutional investors. There is no doubt that this strategy has brought in huge rewards, but it makes sense now to take some risk back and enjoy the profit.
