Tesla Stock Moving Sideways after Earnings Shocker

Posted on August 09, 2019 by Shankar Narayanan

Investors didn’t expect Tesla to post such a wide loss in Q2 2019, but when it did, the stock quickly took a tumble. Fortunately (if you’ve got money invested in TSLA), the slide only lasted a short while, after which it’s been business as usual.  

Above: Tesla Model 3 (Instagram: blizzard_the_tesla)

Key Numbers

Here's a look at some key numbers that surfaced after the Q2 2019 earnings update.

  • Loss per share on an adjusted basis: $1.12 vs. 40 cents expected
  • Revenue: $6.35 billion versus $6.41 billion expected (Source: CNBC

Looking at the chart below, it’s clear that although the market was disappointed with the greater-than-expected loss and lower-than-expected revenue, it wasn’t an earth-shattering event.   

Above: A look at Tesla's chart (Source: Yahoo Finance)

Tesla reaffirmed its guidance

As I wrote in my earlier article, for a growing auto manufacturer like Tesla there is no other metric more important than the number of cars built, and how that number grows over time.

As long as production keeps moving to higher levels, Tesla will keep extracting the benefit of the doubt from the investing community. Since Tesla has proven time and again that the company is yet to encounter a demand shortfall, increasing production capacity remains its single biggest challenge. If production increases, revenue increases. 

Above: Recent aerial photo from the Port of San Francisco (Pier 80) shows thousands of Tesla vehicles ready to ship to the UK (Image: X Auto via Morten Grove)

Tesla not only managed to build more cars than ever during the second quarter of 2019 —  87,048 vehicles compared to the previous high of 86,600 units built during the fourth quarter of 2018 — but it also reconfirmed its guidance of delivering 360,000 to 400,000 vehicle deliveries for the year. 

Tesla’s cash position

Tesla’s decision to raise $2.7 billion in May this year significantly strengthened the company’s financial position, removing any doubts about short term liquidity. By the end of the second quarter of 2019, Tesla had $4.9 billion cash on hand, which is more than twice the $2.2 billion the company had by the end of March 2019. As far as Tesla is concerned, the more money they have in the bank, the better.

Demand is not softening

Second quarter production and delivery numbers have quelled rumors of softening demand for Tesla's electric vehicles. There were two unknowns as Tesla entered 2019: the impact of the US federal tax credit reduction on sales, and Model 3 demand in Europe and China.

When Tesla delivered far fewer cars in the first quarter of 2019 compared to the fourth quarter of 2018, there were concerns about softening demand for Tesla vehicles, but second quarter results proved that the company has found a way to stoke demand.

Above: Hyperchange's Galileo Russell breaks down Tesla's Q2 (YouTube: CNBC)

After delivering a record Model 3, Model X and Model S vehicles in the United States during the 4Q 2018, Tesla's 1Q 2019 sales drop (especially in the US) was sharp — despite Tesla slashing price multiple times during 1Q 2019

As logistics and first-time sales challenges marred Model 3 deliveries in international markets, overall sales took a fall during the first quarter.

But things have slowly begun to settle down. 

  • US sales, though far from the record set in the fourth quarter, have improved to hit 53,975 units. 
  • Tesla delivered 22,745 units in Europe during the second quarter of 2019, which is nearly three times the 7,197 units the company delivered during the same period last year.
  • The US may yet hit its old peak for Tesla, but Europe has provided more than enough cover. With China's sales expected to pick up over the next 12 months, there is enough evidence that Tesla has the demand it needs to keep increasing production. And for the markets, that’s good enough as it waits for more information to trickle in before making its next move.

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Author Bio: Shankar Narayanan is the editor of 1redDrop.com. Has an MBA from Kent State University and an engineering degree from Madurai Kamaraj University. He has been an active contributor to top financial sites like SeekingAlpha and GuruFocus, and has a penchant for talking business, finance, and technology.  

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Posted in Elon Musk, Tesla, Tesla Model 3, tesla news, TSLA


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