All of that guarantees Tesla's Q2 earnings report and call, due on Wednesday afternoon, will get even more investor and media attention than the electric car maker's reports usually get.
With Tesla arguably at a critical point in its history, Wall Street will closely monitor any commentary about Model 3 production and near-term profitability and capital needs. And both investors and others will be interested in hearing what Elon Musk, who made waves on the Q1 call by refusing to answer questions he deemed "boring" and has since directed several controversial tweets at critics, has to say next.
On average, analysts polled by FactSet expect Tesla to report Q2 revenue of $3.99 billion (up 43% annually, thanks in large part to Model 3 sales) and (thanks in large part to the Model 3 production ramp) a non-GAAP loss of $2.78 a share. The consensus for free cash flow (FCF) is at negative $896 million.
TheStreet will be live-blogging Tesla's Q2 report, which is due after the close on Wednesday, and its earnings call, which starts at 5:30 P.M. Eastern Time. Here are some things for investors to keep an eye on.
1. Profit and Cash-Flow Targets
In its Q1 report, following a tweet by Musk to the effect, Tesla forecast it would be GAAP profitable and cash-flow positive in both Q3 and Q4, and thus wouldn't need to raise additional capital this year. The company reiterated that goal in its July 2nd deliveries report.
Will that goal be reiterated again in the Q2 report? And if so, will Tesla, which has cut jobs and slashed its capital spending budget this year, unveil fresh moves meant to help it become profitable?
For now, consensus estimates call for Tesla's GAAP losses and cash burn to diminish in Q3 and Q4, but not evaporate. Recently, a report (confirmed by Musk) that Tesla has asked some suppliers to refund a portion of the money it has given them in the past has raised fresh alarm bells about its financial health.
2. Model 3 Production and Orders
Thanks to an all-out push that was personally overseen by Musk and featured (among other things) building cars around the clock and creating a new assembly line inside of a giant tent, Tesla just managed to hit a goal of producing 5,000 Model 3 units in a week by the end of Q2. Subsequently, the company forecast it would hit a 6,000-vehicle weekly production rate by late August.
Any fresh comments on Model 3 production rates and targets are worth paying close attention to. As are any remarks about Model 3 reservations -- they stood at about 420,000 at the end of Q2 -- and order activity. During the second week of July, more than two years after it began taking reservations for the car, Tesla opened up the Model 3 order process to the general public, albeit while continuing to give reservation holders order priority.
Also: Will Tesla offer any update on when it plans to start making the $35,000 Standard Battery version of the Model 3, and in what volumes? Musk previously said the $35,000 Model 3 would enter production in early 2019. For now, Tesla is only taking orders for versions of the Model 3 that cost $49,000 or more.
3. Model 3 Gross Margins
While Model 3 output clearly picked up in Q2, it's still unknown what kind of margins Tesla saw on delivered cars, amid all of the extraordinary measures it took to hit its production target. Tesla reported in May its Model 3 gross margin (GM) was slightly negative in Q1, and forecast it would be "close to breakeven" in Q2 before becoming "highly positive" in Q3 and staying that way in Q4.
And on the earnings call, Musk indicated Tesla's Model 3 gross margin will be "close to 20%" by year's end. Will Tesla, which once forecast the Model 3's GM would reach 25% once production stabilized at 5,000 units per week, reiterate that goal? Also, how does it see the start of production for $35,000 Model 3 units impacting GMs?
4. Model S and X Sales Trends
In its Q2 deliveries report, Tesla disclosed it delivered 10,930 units of its Model S luxury sedan during the quarter (slightly below expectations), and 11,370 units of its Model X luxury crossover (roughly in-line with expectations). The company also maintained a goal of delivering a combined 100,000 Model S and X units in 2018, which would represent a slight increase from 2017.
For now, these cars still produce a majority of Tesla's automotive revenue. The Q2 report and call could provide some more color on just how much the Model 3 is cannibalizing Model S sales, and how much of an impact China's recently-imposed tariffs on car imports are affecting Tesla's sales within the country.
5. The Energy Business
Trends have been very mixed lately for this sometimes-overlooked part of Tesla's empire. On one hand, thanks to both burgeoning shipments of its Powerpack energy storage systems for utilities and its Powerwall home batteries, Tesla's energy storage deployments have been soaring. On the other hand, its solar unit has been seeing major shipment declines as Tesla tries to improve its bottom line by cutting back on sales spending and focusing on deals featuring up-front payments rather than financing. And making the overall business profitable remains a work-in-progress.
For Q2, the consensus is for Tesla's Energy Generation & Storage segment revenue to rise 46% annually to $418 million. Analyst estimates for the segment's gross profit range from positive $55 million to negative $121 million.
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