Editors' pick: Originally published Feb. 10.
For Tesla (TSLA) investors, Wednesday's fourth-quarter earnings report isn't just about the results -- it's about the company's future and, perhaps even bigger than that, the future of the electric vehicle industry.
Tesla is expected to detail more of its plans on the Model 3, the company's $35,000 mass-market vehicle that is slated to go up against the likes of General Motors' Chevy Bolt. Depending upon which state a customer lives in, the Model 3 could cost as little as $25,000, thanks in part to tax incentives, according to a Bloomberg report.
CEO Elon Musk and team have repeatedly said the future of the company rides (pun intended) on the Gigafactory and the Model 3 coming online together within a few months to make electric vehicles a competitive alternative to internal combustion engines.
In a March 2015 interview with TheStreet, Tesla's communications chief Ricardo Reyes said, "We're ahead of schedule," though he noted that changes between on-schedule and ahead-of-schedule depending on the week. When asked for a more specific date for the Gigafactory's completion, Reyes said late 2016 or early 2017.
On the company's third-quarter conference call in November, Musk said both the Gigafactory and Model 3 are on schedule.
However, Wall Street isn't so sure that plan is going to happen the way Musk and Tesla want.
Tesla has come under fire in recent weeks from those covering it, most notably Morgan Stanley analyst Adam Jonas, who has previously been among the most bullish on Tesla on Wall Street. On Feb. 1, Jonas cut his price target by more than a quarter, noting "lowered volume expectations for Model X and Model 3, a lower valuation for Tesla Energy, and accelerating competition in the mobility business."
In cutting his price target, Jonas said he now expects a late 2018 launch for the Model 3, which is a year later than the company is targeting. "Low demand for electric vehicles categorically and globally in a $30 oil environment leads us to reduce volume assumptions for the Model 3, which we anticipate will achieve an ATP [Average Transaction Price] of $60k or more," Jonas wrote to investors.
Tesla is slated to show off the Model 3, which will likely have a range of 200 miles or more, in March.Palo Alto, Calif.-based Tesla is expected to earn an adjusted 8 cents a share on $1.79 billion in revenue, according to analysts surveyed by Thomson Reuters. By comparison, Tesla lost an adjusted 13 cents on $1.095 billion in revenue in the year-ago quarter.
For now, though, all eyes will continue to focus on the Model X ramp, which has been slower than many expected at the launch.
On Jan. 3, the Palo Alto, Calif.-based electric vehicle maker said it delivered 17,400 vehicles in the fourth quarter, but just 208 of those were Model X SUVs. The company did note that 507 of them were produced, with the remaining 299 to be delivered in the early part of the first quarter.
Earlier this week, Credit Suisse analyst Dan Galves continued to recommend owning Tesla shares, noting that he has "high conviction" looking out over the next 12 months for Tesla. He said the recent sell-off is overdone.
"[We] see the concern on Model X production ramp/volumes, the subject of several recent bearish notes, as overdone at this point," Galves wrote to clients. "We don't really understand the repeated under-estimation of Tesla's ability to deliver, and see this as an opportunity... similar to past concerns over Model S ramp, achieving 25% gross margin, fires, drive unit/door handle quality issues, all-wheel drive ramp, autopilot delays, and the repeatability of Model S volumes."
The Model X was initially priced higher than the Model S, Tesla's award-winning sedan. There were concerns that the market for the Model X was too limited and that its cost put it out of the reach of many buyers.
When the Model X was introduced in September 2015, several people at the event said the cost of the Model X was prohibitive to them. The Signature Series version of the car cost $132,000, while a Model X with Ludicrous Mode, which allows it to go from 0 to 60 miles per hour in 3.3 seconds, will cost $142,000.
In November, the company announced the general version of the Model X starts at $80,0000 and would come in three options -- in 70D, 90D, and P90D variants. A 70D version of the Model X after tax incentives and gas savings in the state of California would cost $61,000.
Investors will be looking for any comments related to potential capital raises, the impact of declining oil prices on demand, and the status of the Gigafactory.