Analysts Expect Tesla To Once Again Lose Money In The First Quarter

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Chris White Tech Reporter
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Wall Street analysts are expecting Tesla to post a higher loss during the first quarter of 2017 than it did at the same time last year despite the electric company reaching record high evaluations.

Analysts believe Tesla will lose about 82 cents a share on revenue of $2.61 billion for the first quarter — the Silicon Valley company lost 57 cents a year ago. They are more concerned about how the automaker will perform going forward than how it did this past quarter.

“We are looking for information on the production schedule for the Model 3, because that is the linchpin of any thesis about the stock,” CFRA analyst Efraim Levy told reporters Tuesday. He wes referring to what some believe is a crucial cog in Tesla’s success: whether the company can follow through on mass producing the Model 3.

“The timing, the success, of that model is critical for them to justify the current stock price, or really, any stock price,” Levy added. Many of Levy’s colleagues, meanwhile, hamstring CEO Elon Musk’s ability to maintain the company’s sky high valuation.

The electric car maker saw its capitalization surge dramatically last month to about $48.2 billion, $3.1 billion more than Ford, the second largest auto company behind GM. Musk bragged about the accomplishment at the time on Twitter and mocked those who shorted the company.

Musk, who owns 20 percent of the company, has promised to deliver nearly 500,000 Model 3s to the market by 2018, despite Tesla’s paltry showing last year. He must produce more than 40,000 Model 3s a month to keep that promise. Tesla managed to produce only 25,000 cars during the first three months of this year.

Other analysts are a bit more pessimistic about Tesla’s chances. Company officials will report first-quarter results after the market closes Wednesday.

Cowen analyst Jeff Osborne said in a note published Monday that he sees “likely ramp delays” on the Model 3. Musk’s California-based company has demonstrated an inability to meet delivery quotas.

“As Tesla’s Model 3 ramp proceeds, we continue to have more questions than answers,” he wrote, adding that the company’s primary factory has recently received several of the machines it will need to begin mass producing the Model 3.

UBS analyst Colin Langan said Tuesday that he remains “cautious on the launch timing given TSLA’s history of delays.” The company is unlikely to sell its Model 3 profitably at this stage of the game, he claimed.

“At our estimate of $155/kWh battery pack cost in 2025, the Model 3 will still cost about $7,000 more to build than an equivalent ICE vehicle,” Langan added.

Tesla’s SolarCity merger has also affected analysts’ ability to effectively size up the electric automaker’s financials.

The solar panel provider, which leases its panels to customers, reached long-term lease agreements with homeowners before they defaulted on their mortgages, according to a Feb. 22 report from The New York Times. There could be even more default cases, the report notes.

Bank of America (BofA) lowered its expectations for Tesla in April because of the merger.

Tesla shares will fall within the next year to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share, according to Bank of America research analyst John Murphy. He expects the Silicon Valley company to lose $2 per share over the next year, which is up from the $0.25 loss per share he forecast earlier this year.

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