Tesla will be under the microscope in earnings call
Auto industry observers and financial analysts will closely watch Tesla Inc.'s second-quarter earnings report Wednesday for signs the financially challenged company has staunched record losses that have sapped its cash reserves.
The earnings will be announced after financial markets close for the day. The earnings call will take place amid ongoing friction between Tesla CEO Elon Musk and the financial analysts and reporters who saw him dismiss tough questions as "boring" and "dry" during the Silicon Valley carmaker's first-quarter earnings call.
Tesla reported a $709.6 million loss in the first quarter of 2018, more than double what it lost in the same period a year ago, and it burned through $745.3 million in the first three months of the year. The results came just more than a month after Musk tweeted an April Fools’ joke that his company had gone bankrupt.
David Kudla, CEO of Grand Blanc-based Mainstay Capital Management LLC, said the numbers are likely to be bad again for Tesla.
"Why does Tesla announce they are considering a facility in Europe just days before their earnings report? A facility to meet what demand? This is more Musk fantasy and PR tomfoolery," he said.
"Tesla selling 'limited-edition surf boards' before earnings report? Another PR stunt distraction," Kudla continued. "Last quarter's losses were Tesla's worst. It will be bad again this quarter. It is not a question of if, but when, Tesla will be going back to the capital markets to raise cash."
Jeremy Acevedo, manager of industry analysis at Edmunds, said there were some bright spots for Tesla's production numbers in the second quarter that might be enough to mollify some investors. The company said in early July it had built 5,000 Model 3 electric sedans in a single week, hitting a long-delayed goal as it tries to prove it can mass-produce electric cars.
"But the question remains as to whether these accomplishments are enough to quiet the naysayers and give investors confidence that Tesla has the wherewithal to be successful for the long haul," Acevedo said.
He added: "The murkiness of the new Model 3 reservation process and recent vehicle delivery challenges prove there are still a lot of crucial practical details Tesla is still working through. If the company can iron out the kinks and hit its production stride in the back half of the year, 2018 could be the year Tesla finally proved itself as a real mass-market car company.”
Michelle Krebs, senior analyst for Autotrader, said investors will be watching for signs of potential profitability from the carmaker, which has never posted a profit despite high stock prices and a dedicated fan base that lavishes praise on both the company and Musk.
"The things we'll be watching for are cash flow, have they slowed down the cash bleed, are we getting closer to profitability, are they delivering the number of vehicles and the revenue they promised," she said. "Also, anything that have to say about where they are on production of the Model 3."
Krebs said investors will listen carefully to what Wall Street analysts ask — and how Musk answers, given his past combativeness.
During Tesla's first-quarter earnings call in May, Musk interrupted financial analysts who questioned him about Tesla's fiscal performance and labeled their questions
"Excuse me. Next. Boring bonehead questions are not cool. Next?," Musk said in response to one investor's question about Tesla's "capital requirements."
"We're going to go to YouTube. Sorry. These questions are so dry. They're killing me," Musk said in response to another question about Model 3 reservations.
Kudla said Tesla also is facing complaints about the quality of its cars.
"More and more people are complaining about the quality of their Tesla," he said. "As predicted, we are moving from production hell to warranty service hell. A recent study showed that in the first 30 days of ownership, there were at least one complaint of defects on 62 percent of Model 3 vehicles. And, 51 percent had one or more service center visits.
Kudla continued: "Musk will surely brag about the M3 weekly production numbers, but we now have real concerns about the actual demand, cost to produce, quality, and competition on the horizon. In their frenzy to meet self-imposed production targets, you have to wonder at what cost were these goals met and at what expense to quality and safety."