Tesla Q2 Earnings Estimates & Preview

Rob Maurer

Tesla (TSLA) -Get Report is set to report Q2 2020 earnings after market close on Wednesday, July 22nd. If Tesla is able to post a GAAP profit for the quarter, they will become eligible for inclusion in the S&P 500 index. With index tracking funds managing $4.6T in assets, Tesla's inclusion in the index could lead to 26 million shares of TSLA stock being purchased by these funds. With a roughly 147 million float share count, 26 million shares would represent a significant 18% of float.

Analyst estimates collected by Tesla currently suggest a loss, but expectations have risen in recent weeks. The chart below summarizes the company compiled estimates and includes Tesla Daily's estimates for comparison.

Screen Shot 2020-07-21 at 4.08.34 AM

For more analysis, see the included video and personal note below.

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In general, my estimates are higher than consensus estimates.

Sales

  • I am expecting $5.9B in revenue, with more automotive revenue than consensus but less energy and services/other revenue. A portion of the automotive revenue variance is due to regulatory credit sales, which I estimate at $300M vs. consensus of $228M. The remainder is likely due to variances in Model Y delivery estimates and average selling prices on other vehicles.

Gross Profit

  • I am expecting significantly more gross profit than consensus, at $1.2B vs. $966M. This is driven by automotive gross profit. Variance here is likely due to higher margin forecasts on Model Y and Shanghai Model 3. Tesla's margin performance in Q1 was impressive considering the early stages of production ramps on both these product lines. I expect continued margin expansion here, offsetting margin contraction on Tesla's other product lines attributed to coronavirus-related production shutdowns. I am forecasting an improvement in Tesla's automotive gross margin excluding regulatory credits from 20.0% in Q1 to 20.6% in Q2. Consensus is 17.3%.

Operating Expense

  • I am forecasting operating expenses to be down quarter-over-quarter by 12% due to coronavirus-related downtime and furloughing.

Net Income

  • All eyes will be on Tesla's GAAP net income line when they report earnings on Wednesday. Analyst consensus sits at a $78M loss, but whisper numbers likely expect a profit from Tesla. I am estimating a positive $145M GAAP net income which would make Tesla eligible for S&P 500 inclusion. As noted, my forecast includes $300M in regulatory credits. If credit sales contract significantly from Q1, it would be possible for Tesla to post a loss even with ex-credit margins ahead of consensus estimates. 

Guidance

  • In Tesla's Q1 shareholder update letter, the company told investors to expect an update on guidance with the Q2 report. Tesla said they had production capacity to exceed their target of 500,000 deliveries for the year, but uncertainty after coronavirus-related shutdowns caused them to put their guidance on hold. 

"We will again revisit our 2020 guidance in our Q2 update." - Tesla, Q1 update letter

No estimates made here should be taken as financial advice. Earnings estimates involve many variables, many of which are not possible to fully anticipate.

Disclosure: Rob Maurer is long TSLA stock and derivatives.

Comments (1)
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rahulio
rahulio

great analysis. This is a milestone on wallstreet to have someone who is as good as the best wall street analysts open their work to everyone, and take every detail into account.


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