Tesla earnings report shows progress, but stock market is unconvinced

Tesla Model S

As expected, Tesla’s Fourth Quarter & Full Year 2016 Update depicts steady progress toward the company’s ambitious goals. Compared to Q4 2015, almost all the numbers are soaring. Vehicle deliveries are up 27%, gross margins are up 110 basis points, and revenue is up 88%. Of course, expenses are way up, but losses are down, at 78 cents per share, compared to $2.44 per share for Q4 2015. The number of stores and Superchargers is growing steadily, and Tesla’s nascent energy storage business is starting to bring in revenue.

TSLA stock has climbed steadily in the weeks leading up to this report, as most observers seemed to come around to the following ideas:

  • Tesla really is going to deliver Model 3 more or less on time, and it’s going to be just as cool as promised.
  • The EV scene in general is starting to take off. If it hasn’t reached the point of no return, it soon will.
  • Autonomous vehicles are going to generate huge demand, and Tesla is the leader in the field.
  • Fears that SolarCity would prove indigestible, or that the new regime in Washington would try to reverse the progress made on electromobility, have receded.

However, shortly into the next trading day following the report, TSLA plummeted, as the bears began to make their case. While the numbers are mostly up compared to a year ago, compared to last quarter they’re mostly down. Tesla is still burning through cash like rocket fuel, and with the company investing in a massive production ramp-up, that’s likely to continue. Stock mavens are concerned that the company may soon need to raise more cash. Elon Musk has admitted that things are “very close to the edge” and that “it probably makes sense to raise capital to reduce the risk.”

Furthermore, while most of us in the EV media believe Tesla’s assurances that it has learned its lesson, and that Model 3 will not be subject to the fiddly features and supplier SNAFUs that caused the notorious delays in Model X’s production schedule, on Wall Street that is far from the case. Most stock analysts expect the timeline to slip, and some are even skeptical that the new mid-priced model will be profitable, at least at first.

 

Source: Tesla, NASDAQ, ValueWalk