Tesla Motors Inc (TSLA) Misses Estimates, Needs Positive Cashflow

Tesla Motors Inc (TSLA) Model X

Tesla Motors Inc reported its fourth quarter (Q4 2015) earnings after the market closed on Wednesday and the firm failed to meet expectations. Yet, despite the underperformance in earnings, the shares of Tesla Motors actually soared in after-hours trading – the stock gained as much as 14% at one point and it is on course to open this morning at $155 with pre-market gains of 7.89%. Wall Street has been showing serious interest in Tesla’s performance in the fourth quarter and full year 2015 as state of affairs at the firm has been called into question.

To begin with, there have been rumors that the demand for the Model S has reached a plateau and there are rumors that many of the issues that plagued the Model X have not yet been resolved. More so, the slower than expected pace of the Gigafactory project has raised concerns about Tesla’s ability to enter the mass-market with the Model 3 as quickly as hoped. Now, earnings are out and it will be interesting to see how Wall Street responds to the EV maker today.

Tesla Motors’ Q4 results by the numbers

Earnings:  Losses widened at Tesla Motors as the firm reported adjusted loss of ($0.87) per share. Analysts have said that they expected Tesla to report earnings of $0.12 per share – but it is glaring that profits were elusive for the electric vehicle maker once more in Q4 2015. Tesla missed estimates by a massive 833% and it marked a 569% drop from a loss of $0.13 in the year-ago quarter

Revenue: The firm also showed weakness on the revenue front as it posted revenue of $1.75B below the consensus estimate of $1.80B in revenue. The firm missed revenue expectations by 2.8% but revenue was up 59% on a year-over-year basis

Deliveries: In Q4, Tesla said it delivered 17,478 vehicles including 206 Model X SUVs. The firm noted that its global deliveries were up about 76% year-over-year in Q4 2016.

Guidance: For the current quarter, Tesla Motors says it would deliver about 16,000 vehicles to make a 60% year-over-year increase. The firm expects to deliver between 80,000 and 90,000 new vehicles in 2016 to beat the analyst forecast of 79,000 deliveries.

Tesla’s thirst for positive cashflow

Tesla Motors has never turned a profit, the firm has negative cashflow, and some Tesla bears believe that the firm losses money on every EV it sells – even with tax credits and incentives. In Q4, the firm reported that Non-GAAP operating expenses jumped to $429 million to mark an 18% sequential increase. The firm also expects operating expenses to grow by about 20% for 2016 as it prepares to bring its mass-market Model 3 to the market.

In the fourth quarter earnings release, Tesla Motors revealed that it is working hard to obtain positive cashflow in fiscal 2016. The firm in a statement said, “We expect to generate positive net cash flow and achieve non-GAAP profitability for the full-year 2016,”

The firm is also adopting a stricter approach to costs as it seeks to improve its margins. Jason Wheeler, the firm’s new CFO noted that the firm has taken “real steps” to move to positive cash flow by “a relentless focus on automotive unit cost reductions.” The firm noted that gross margins for the S should “begin to approach” 30% by the end of 2016 and the firm expects Model X margins to rise up to 25%.

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.


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