For bears, Elon Musk's electric car outfit burns through cash more effectively than one of the billionaire's sold-out flamethrowers. However, Telsa showed just last week that it is still able to tap the capital markets.
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When Musk presents fourth-quarter results after the close on Wednesday, cash burn, capital expenditures and progress on the Model 3 mass-market electric car will get close attention.
Tesla burned through $1.4 billion in the third quarter, and Wall Street expects the company to post a $958 million free cash flow shortfall in the fourth quarter. The consensus calls for a loss of $3.11 per share from nearly $3.3 billion in sales. Tesla shares gained 3.4% to $345.29 ahead of the earnings report and call.
"We think the market continues to look favorably on their terminal value; as long as that's the case the markets will remain open," said Jamie Albertine of Consumer Edge Research LLC, noting that Tesla is "pretty judicious" in its financial planning.
Tesla was able to sell $546 million in debt backed by auto leases last week, according to Bloomberg, and reportedly could issue more such debt to address capital needs.
"We expect the bulls and bears are going to be equally defensive of their views near term until we can get to a critical volume of Model 3 production," Albertine said.
If Tesla's Model 3 production suffers delays, Musk would likely have to raise more capital as he looks to build a plant in China and introduce the Roadster, Semi and Model Y, UBS analyst Colin Langan suggested in a preview of Tesla's earnings. UBS expects free cash flow to improve to negative $500 million in the fourth quarter, as $300 million in deposits for the Tesla Semi and Roadster roll in. Free cash flow losses will rise to $900 million in the first and second quarters, UBS forecasts.
Meanwhile, Snap's earnings beat and gains in both users and revenues overshadowed concerns about cash as the stock surged more than 40% on Wednesday.
Snap reported a loss of 28 cents per share after the close Tuesday, versus a consensus loss of 33 cents per share. Sales grew 72% to $285.7 million and daily average users increased 18% from the prior year to 187 million.
Snap burned $202 million in cash during the fourth quarter, which was an improvement from the third quarter free cash flow of negative $223 million.
The start of the PyeongChang Olympics in two days could give Snap another boost. Snapchat will stream video from investor Comcast Corp.'s (CMCSA) NBC.
"Though SNAP is poised to benefit from a deep Winter Olympics content partnership with investor NBCU, management cautioned investors from expecting further revenue growth acceleration in 1Q, noting traditional brand advertising seasonality," noted Wells Fargo Securities LLC analyst Peter Stabler in a Wednesday report.
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