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Tesla Motors Inc Shares Sink As Earnings Worries Rise

Tesla Motors inc (TSLA) Model 3

Tesla Motors Inc (NASDAQ:TSLA) shares were sinking on Tuesday’s market as worries about the company’s coming earnings report compressed the optimism of the company’s fans. Tesla will deliver its earnings numbers for the first three months of 2015 on May 5 after the market closes on Wall Street.

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At time of writing shares in Tesla Motors were trading at $207.28 down 1.19% for the day so far. With worries of deep losses on the horizon, it’s not clear where Elon Musk and his compatriots are going to get the cash needed to finish the company’s battery factory, or to continue operations.

Tesla Motors earnings seen lower

A report on Tesla Motors Inc (NASDAQ:TSLA) which was released on Tuesday morning, lowered expectations for the company’s earnings numbers across the market. The report, which came from Morgan Stanley analyst Adam Jonas, asserted that Tesla’s loss will be bigger than previously expected, compounding worries about the company’s cash resources.

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Analysts are expecting losses of just 48 cents per share by consensus, making Mr. Jonas an outlier in his pessimism about the company’s future. Despite that, the analyst put a price target of $280 on the company’s shares and rates the company at Overwieght.

According to Jonas, Tesla will report a loss of $2.30 for the full year 2015. He added that Tesla would sell just 51,000 vehicles in 2015, a significant amount below the 55,000 that Elon Musk has promised on multiple occasions. Jonas’ reckons that the company will take a serious hit in profitability in the run-up to the launch of the Model X. The analyst says that Tesla Motors will sacrifice itself financially in order to give that vehicle a successful debut.

Tesla cash worries

With that in mind, one of the most important numbers that Tesla Motors will produce on May 5 is the company’s cash flow for the first quarter. If the company burned more cash than expected during the first quarter of the year, it will reflect poorly on the company’s future. With constant losses, Tesla needs to find a secure, stable way to fund itself going forward.

In the earnings report concerning the quarter ended December 31 2014, Tesla Motors showed cash reserves of $1.9 billion. The company burned about $1 billion in cash in total during the period, but the company raised a total of $2.1 billion from capital markets during the period.

If that continues in 2015, and all signs suggest that it will, Tesla is going to have to return to either the debt or the equities markets in 2015. The company has not yet announced such a move, a black spot that is sure to make many of the company’s investors nervous.

An additional equity round dilutes their holdings, while and additional debt round makes the company less financially stable over a long incubation period to come.

Since the beginning of the year shares in Tesla have been trading flat, but there’s been a large amount of unevenness in between January 1 and today.

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Paul Shea

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