Tesla (TSLA) - Get Report on Wednesday posted a wider-than-expected loss for the fiscal first quarter, but most Wall Street analysts seemed to ignore that, instead highlighting the electric carmaker's "solid" progress on debuting its first mass-market sedan, the Model 3.
After Wednesday's closing bell, the Palo Alto, CA-based company reported an adjusted loss of $1.33 per share, which was well below analysts' expectations for a loss of 82 cents per share. But revenue came in at $2.70 billion, which exceeded Wall Street's estimated $2.61 billion.
Shares of Tesla were sliding 4.3% to $297.65 on Thursday morning. The stock is up more than 40% so far this year.
Tesla delivered 25,051 vehicles during the period, which set a new quarterly record and was roughly in line with analysts' projections. Tesla was able to set a new delivery record thanks to a 69% year-over-year increase in the sale of Model S sedans and Model X sport-utility vehicles.
In a letter to shareholders, CEO Elon Musk remained confident that the company will meet its ambitious production goals for Model 3, saying the $35,000 electric car is on track to ship in July. That's on top of Musk's other plan to produce 500,000 vehicles next year and, eventually, one million vehicles in 2020. The company produced roughly 84,000 vehicles last year.
"Preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017 and to 10,000 vehicles per week at some point in 2018," Musk said in the letter. "We are working closely with all Model 3 suppliers to ensure their readiness ahead of start of production."
Musk said the company will provide delivery guidance for the second half of 2017 once Model 3 production begins.
Following the results, Wall Street analysts acknowledged that Tesla has a lot of work to do to reach those production goals, but were nonetheless reassured by Musk's confident tone on the earnings call. Here's what they had to say about the quarter:
Colin Rusch, Oppenheimer (Perform)
"TSLA posted solid results, in particular on normalized auto gross margins at 25.3% up 310 base points quarter-over-quarter. In reiterating guidance for Model 3 deliveries, TSLA has an exceptionally large volume of work to do in upcoming months to reach its target of 5k vehicle/week by the end of 2017. We are adjusting GM to account for Model 3 ramp in 2H17, but note that progress on manufacturing to date is performing ahead of our expectations."
Ryan Brinkman, J.P. Morgan (Underweight, Price Target raised to $190 from $185)
"Tesla's 1Q results tracked better than expected, led by stronger margin on roughly in line revenue, and a better than expected cash flow performance, given lower capital expenditures...Most important, in our view, was that cash performance tracked better, including a significant improvement in operating cash generation relative to 4Q16."
Rod Lache, Deutsche Bank (Hold, $240 PT)
"Tesla reported mixed Q1 results with automotive gross proﬁt coming in much stronger than expected. Tesla did not provide any new data points on the launch. But they nonetheless sounded conﬁdent."
Ben Kallo, R.W. Baird (Outperform, $368 PT)
"TSLA beat our estimates, displayed strong automotive and Tesla Energy gross margin, and reiterated 1H:17 delivery guidance. Importantly, the Model 3 remains on track for July production and should ramp to ~5k Model 3 vehicles per week by YE:17. Additionally, TSLA expects to begin production of the solar roof in Q2, and remains well capitalized for its upcoming growth initiatives. We remain buyers at current levels and believe continued execution will drive shares higher."
David Whiston, Morningstar (Hold, $197 PT)
"We see the company's results in a holding pattern until Model 3 sedan production begins in July...We think the stock trades on momentum for option value that, if realized, is still many years away, and therefore we do not think any single quarter's results are critical to the investment thesis."
Brian Johnson, Barclays (Underweight, $165 PT)
"Despite having been "enlightened" by the bulls, we still will point out the negatives in the quarter...And while we know that financials are not key to the Tesla view of many of the "true believers'" (we call them blue pillers), we have not yet achieved a woken enough state of enlightenment that we can overlook the negatives in the quarter.
Brad Erickson, Pacific Crest Securities (Sector Weight)
"While TSLA's report reinforced our view that demand for arguably half its profit pool is plateauing, we continue to see few challenging near-term hurdles, which keeps our near-term bias more positive that the Model 3 product-cycle trade can continue."
Jeffrey Osborne, Cowen (Underperform, $155 PT)
"We believe investors will walk away from the call somewhat disappointed as management provided little insight on the Model 3 ramp or Model S/X orders. While the Model 3 looks to be on time for a July launch, commentary around S vs 3 confusion among customers is concerning.
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