Tesla Needs An EPS Beat To See Some Upside Post Q2 Results

  • Delivery targets were missed during the second quarter due to shipments in transit.
  • Consensus estimates show a loss of $0.54 on revenues of $1.65 billion..
  • Company outlook is positive on subsequent quarter deliveries and 2020 production targets.

Tesla (NSDQ:TSLA) is expected to report second quarter earnings on August 3, after market close.

2016 has been a mixed bag for Tesla. After the roaring success marked by the launch of Model 3 that notched up an unprecedented 400,000 reservations within a month, Tesla missed delivery estimates during first the quarter and missed it again during the second quarter, and had to revise their 2016 sales target to 79,180 cars - lower than the previously expected range of 80,000 to 90,000 cars.

After the wild reception the Model 3 got worldwide, Tesla started ramping up its production, setting an ambitious goal to make 500,000 cars by 2018, a full two years earlier than the previous target of 500,000 cars by 2020. Now, Tesla wants to build 1 million cars by 2020. Essentially Tesla has doubled up on its expansion plans. But unfortunately for Tesla, the ramp up hasn’t really gone well so far.

Deliveries in Q2

Tesla Motors, Inc. delivered 14,370 vehicles in the second quarter, (9,745 Model S vehicles and 4,625 Model X vehicles), falling far short of their estimated 17,000 cars for the period. Tesla says that 5,150 cars are on the way to the clients and now expects to deliver them during early third quarter. The downward revision of targets has caused analysts to adjust their models, and earnings estimates for second quarter are a bit all over the place, with analysts swinging from one end to another.

Consensus Estimates

JP Morgan expects the company to report a loss of 60 cents per share instead of the previously estimated 45 cents loss per share. The company reiterated its under-weight rating for the stock, and slashed its target price from 185 to 180. Tesla is now trading at the $230 level, and the stock is down by 4.17% since the start of this year. Morgan Stanley revised its 2016 EPS estimates for Tesla to -0.02 cents per share from the previously estimated $0.68 cents per share and expects the company to miss its 79,180-unit target and deliver only 70,000 cars for the year.

The consensus Q2-2016 estimate is a loss of 54 cents per share on the back of $1.65 billion in revenue. It is safe to say that production and delivery problems have pushed a lot of analysts to correct their expectation downwards.

Since the second quarter sales numbers are already out, Investors will be looking to hear updates on the Gigafactory, progress on production ramp and the outlook for the rest of the year. If the company comes out with earnings in line with estimates and gives a positive outlook for the second half of the year, the stock may see some upside.
TSLA stock chart

Source: Tesla stock price chart by amigobulls.com

Delivery Guidance for Second Half of 2016

According to a company press release on July 3, this is their delivery estimate for the remainder of the year:

“With continued productivity improvements, Tesla expects output to reach 2,200 vehicles per week in Q3 and 2,400 vehicles per week in Q4. Current order rate trends and backlog support production at those levels. In total, Tesla expects to produce and deliver about 50,000 vehicles during the second half of 2016, approximately equal to all of 2015.”

Tesla Stock Outlook

Deliveries and EPS are the key drivers of Tesla stock movement. Despite lower price targets, the stock is still trading at the $230 level. Any miss in earnings could push it further down. Having missed their delivery target for the second quarter, Tesla’s only chance of retaining current levels is to meet or beat estimates on EPS.

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