At Tesla, another quarterly loss is likely, but Wall Street is hoping demand remained intact

Tesla Inc. is expected to report second-quarter results after the bell Wednesday amid a rally for its battered stock fueled by better-than-expected quarterly sales.

Investors will zero in on Tesla’s TSLA, +2.35% outlook for the year and whether the company will continue to say it will sell 360,000 to 400,000 vehicles this year as promised.

“The ability of the stock to move higher will really depend on the (sales) guidance,” said Garrett Nelson, an analysts with CFRA Research. “We are still skeptical that they will hit that goal.”

Tesla earlier this month reported second-quarter sales that were above Wall Street expectations (and a record for the company, it said.) That has buoyed the stock in recent sessions and primed investors to expect a smaller quarterly loss next week.

The story of the second quarter changed with that sales beat, said Bill Selesky, an analyst with Argus Research. Selesky is expecting Tesla to lose an adjusted 18 cents in the second quarter, which is less than the Wall Street consensus.

“We are still hearing that demand trends bode well for Tesla,” he said. What remains to be seen is whether Tesla will rein in its costs and expenses and improve its margins, he said.

Tesla has reportedly embarked on “hardcore” penny pinching, with Chief Executive Elon Musk and Chief Financial Officer Zach Kirkhorn scrutinizing expenses big and small.

Kirkhorn in April promised a return to profitability by the third quarter.

Here’s what else to expect:

Earnings: Analysts polled by FactSet expect Tesla to report an adjusted quarterly loss of 41 cents a share. That would compare with a loss of $3.06 a share in the year-ago quarter.

Tesla was in the black for the third and fourth quarters of 2018, but swung back to GAAP and non-GAAP losses in the first quarter. Wall Street expects a return to non-GAAP profitability by the fourth quarter.

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, is expecting an adjusted loss of 28 cents a share.

Revenue: The analysts surveyed by FactSet expect Tesla to report sales of $6.5 billion in the quarter. That would compare with sales of $4 billion in the year-ago period, and $4.5 billion in the first quarter.

Estimize projects sales of $6.6 billion for Tesla in the quarter.

Stock movement: The stock is enjoying a bit of a reprieve in July: it has gained 14%, which follows a 21% gain in June. In the first three months of the year, however, losses were steep, and as a result Tesla shares are down 23% for 2019. That contrasts with gains of 19% and 17% for the S&P 500 index SPX, -0.23% and the Dow Jones Industrial Average. DJIA, +0.08% 

What else to expect: Tesla’s plans for China are always high on the list of items investors care about.

Earlier this week, analysts at Morgan Stanley said that Tesla could ramp up production in China faster than anyone has realized, putting it on track to become a leading luxury electric-vehicle maker in that country. Tesla’s Shanghai factory is still under construction.

Investors would also like an update on the Model Y, Tesla’s next vehicle, a compact SUV, that was unveiled in March. It’s the first Tesla vehicle since the Model 3, unveiled three years ago, and one that Tesla hopes will allow it to cash in on U.S. drivers’ appetite for SUVs.

Tesla recently simplified its vehicle lineup and yet again tweaked its prices, getting rid of cheaper versions of the Model S and Model X and lowering the price of the Model 3.

Tesla hasn’t disclosed whether it will build the Model Y at its California plant or at its Nevada gigafactory, although Musk is reportedly leaning toward the California plant in Fremont.

Musk has kept a low profile in recent months, but earlier this week made headlines, when his startup Neuralink Corp. showed what it billed as an advance toward a therapeutical device to connect human brains and computers.

Related: Elon Musk’s ‘Space Mountain’ rocket ride: Anywhere on Earth in under 20 mins

Cue the questions about time spent at Tesla, his only publicly traded company, versus his other endeavors, which include rocket maker Space Exploration Technologies Corp., or Space X.

Source: Read Full Article