Tesla Motors Inc is a firm that’s worth taking a magnifying glass to. It’s one of the most widely followed growth stocks on Wall Street, and that means that every little detail, if repeated often enough, can be of prime importance. We’ve seen this happen again and again, and the stock has been pushed in both directions. We may be headed for a major break this week.
Tesla Motors is rearing to release its earnings numbers for the third quarter of 2015, at least by statutory obligation. The firm’s shares have had a pretty rough time in the month since that quarter closed, and the pressure doesn’t seem ready to let up any time soon. Here’s a look at what Wall Street will focus on when earnings arrive, and what numbers are really important.
Tesla Motors needs to hit shipping targets
We already know how many cars Tesla Motors got to buyers in the third quarter, and we know it just wasn’t enough. Despite a nice surge in shipments to China, and a more or less healthy market for the Model S overall, the firm managed to ship just 11,580 cars. That’s the most the firm has ever moved in three months, but it’s just not what Wall Street wanted.
Tesla Motors forecast total shipments of 55,000 for 2015. In its last earnings report the firm pulled in that forecast and said that 50-55,000 was a more realistic number. With just 33,000 Model S units shipped so far in 2015, Tesla Motors needs to sell 17,000 cars in the fourth quarter in order to hit that target.
There’s still quite a lot of hope on Wall Street that Wall Street will meet its targets, but 17,000 shipments in the holiday quarter doesn’t seem likely, particularly with the Model X issues that are ongoing. This will be one of the major questions on the earnings call, and it may be the most effective in swaying Tesla stock sellers.
Keeping cash in Tesla Motors
Shareholders may have had a problem with the Reuters report that claimed Tesla Motors lost more than $4,000 on each car sold in the second quarter, but it was based on simple, truthful math. It doesn’t matter what the firm spent the money on in the three month period, what matters is that each car lead it to burn more and more cash.
Tesla Motors exists on sufferance. It’s not able to keep itself afloat. Elon Musk burns money, on projects like the Gigafactory and the Model X, like there’s no tomorrow. Those investments might pay off in future, but right now, Tesla Motors has to ask other people to pay for them.
Other people, in this case stock market traders, Wall Street banks, and Elon Musk himself, have been happy to pay for Tesla Motors’ projects so far. The firm has had more than one extra issue of stock, including a $700M sale in August. The amount of money the firm spent during the quarter will be of vital importance to those trying to sum up the risks of holding Tesla Motors shares.
Cash burn is an issue in each and every quarter for Tesla Motors, and the firm, despite one or two shocks, usually gets a free pass. So far Elon Musk has had no trouble finding sources of cash to use for the Model 3 and all of his other projects.
Tesla Motors is a qualitative firm
Tesla Motors won’t hit the numbers it has promised for the year, and it’s likely that the firm is going to have to reel in another couple of numerical promises on Tuesday afternoon. That’s not what really runs the firm’s stock, however. If it was, Elon Musk would never have gotten to where he is today.
There’s a reason why Jim Cramer calls Tesla Motors a “story stock.” The firm’s value travels on the back of a tale told in Fremont, and broadcast across the world. Even if Tesla Motors fails to impress on the hard data on Tuesday, that doesn’t mean the firm is dead in the water.
More than anything Tesla Motors shareholders are looking for signs that Elon Musk, JB Straubel, and the rest of the firm’s team will be able to follow through on promises made about the future of the auto market. In their eyes shipments of 500,000 cars in 2020 is a distinct goal.
There’s a few pieces of qualitative info that Tesla Motors could show in order to soothe Wall Street worries about that future. One is a confirmation about the Model 3 design reveal next spring, another is an update on the firm’s Reno Nevada Gigafactory.
What’s really going to be weighing on minds heading into the big reveal is, however, when the Model X will finally be made and shipped in mass amounts. Early buyers still haven’t gotten their hands on the EV SUV, and failure on the part of Tesla Motors to explain delays to those with shares may start to raise the risk factor for the Model 3.
Guessing Tesla Motors stock showing
It’s the qualitative bias that keeps traders on their toes when it comes to Tesla Motors. Like so many other major tech concerns, the firm is able to bend Wall Street to a narrative with great effect. That means that even if Tesla Motors says its targets for this year and next are wrong, stock may be up in two weeks time after the firm promises a profit in Q3 2016.
Tesla Motors isn’t worth betting on, for most traders at least, heading into an earnings report. There’s just too much that nobody knows about the mood of those buying and selling shares in Elon Musk’s firm.
No matter how close you look at the numbers, the story will usually win out when it comes to Tesla Motors. That’s been the trend since 2013, and there doesn’t seem much reason for it to change now. If it does, however, there may be a major break to the downside on Tuesday.
Tesla Motors# numbers may not matter too much, but what Wall Street is looking for from the firm isn’t good, and, if traders pay attention to the figures and just the figures, may not support the $30B value on Elon Musk’s car maker.