Tesla misses analysts’ forecasts, loses $2.90 per share in first quarter

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Tesla (NASDAQ: TSLA) badly missed analysts’ earnings estimates for the first quarter of 2019. The company reported an adjusted loss per share of $2.90, much worse than analysts’ estimated loss per share of $0.69.

The company also missed on revenue, posting $4.54 billion in comparison to the analyst estimate of $5.19 billion.

Earlier this month, Tesla warned that its first quarter 2019 earnings results would be “negatively impacted” by lower than anticipated delivery volumes and price adjustments. The company’s earnings release reemphasized this point.

“Due to unforeseen challenges, we had only delivered half of the quarter’s numbers 10 days before the end of the quarter,” the report reads. “This caused a large number of vehicle deliveries to shift into the second quarter.”

The electric vehicle company ended the first quarter with $2.2 billion of cash and cash equivalents on hand, down $1.5 billion from the end of 2018.

Tesla Chief Financial Officer Zach Kirkhorn attributed the decrease to the payoff of a $920 million convertible bond, as well as an increase in the number of vehicles in transit to customers at the end of the quarter and the production and deliveries of Model 3 vehicles to overseas markets.

International delivery complications and the large push at the end taxed the company’s delivery operations, according to Kirkhorn.

“We started production and deliveries of Model 3 vehicles for overseas markets during the first quarter. To quickly meet international demand, Europe and China Model 3 builds occurred in the first half of the quarter, with builds for local U.S. markets in the second half,” the release reads. “This wave of quarter-end deliveries in the U.S., China and Europe meant that even short delays caused deliveries to be deferred to the second quarter. To improve our operations, cost efficiency and customer experience, we are in the process of balancing our regional vehicle builds throughout the quarter.”

Tesla co-founder and CEO Elon Musk said he hopes to avoid a situation like the company experienced in the first quarter, when customers all over the world were receiving their cars at the same time. This stressed the company’s resources and required them to pull employees from other departments just to get cars delivered.

While the company’s investor call focused heavily on consumer vehicles, Tesla President of Automotive Jerome Guillen spoke briefly about the Tesla Semi. He said the prototype of the electric semi was working “very well.”

Guillen said the company uses the semi “all the time,”  loading them to the maximum weight and even using them to deliver some Model 3s.

He said production on the semi will begin next year.

Tesla produced approximately 63,000 Model 3 vehicles in the first quarter, about 3 percent more than the previous quarter. The company attributed the subdued increase to changes to the production process for the introduction of new variants of Model 3, fewer working days and a supplier limitation.

During the company’s investor call, leaders said they did not anticipate supplier limitations to continue into the second quarter.

The company reported that the Model 3 was the best-selling premium car in the U.S. during the first quarter, outpacing the runner-up by about 60 percent. The earnings release attributed this partially to the fact that electric vehicles are priced lower than their gas-powered counterparts for the first time in history.

Deliveries of Model S and Model X vehicles declined sharply, dropping to 12,100 vehicles from the company’s two-year run rate of 25,000 deliveries per quarter.

“This decline was mainly caused by weaker first quarter demand due to seasonality, pull-forward of sales into the fourth quarter of 2018 in the U.S. due to the first scheduled reduction of the federal electric vehicle tax credit in the first quarter of 2019 and discontinuation of our 75 kWh battery pack,” the release reads. “We also had a mismatch between orders and deliverable cars. For example, due to adjustments in pricing mid-quarter, the take rate for the performance versions of Model S and Model X increased faster than we were able to supply.”

When analysts on the call expressed concern about demand for Tesla vehicles moving forward, Musk said demand for Model 3 vehicles, Model S vehicles and Model X vehicles is strong. He expects upgrades to Model S and Model X vehicles to result in a strong surge in demand.

Musk said the company is seeing an uptick in demand, which he expects to continue as the company moves out of the seasonality of the first quarter, noting that people do not like buying cars in winter.

When asked why he has not considered raising capital to support Tesla’s growth, Musk was somewhat soft on the issue.

“I don’t think raising capital should be a substitute for making the company operate more effectively,” Musk said. “At this point, I do think there is some merit to raising capital.”

When pushed to expound on whether or not investors should expect a capital raise from Tesla in the short- to medium-term, Musk repeated his answer, noting that it is “very important” for the company to create a solid foundation and exhibit financial discipline as it scales.

“I do think there is some merit to raising capital at this point,” he added again.

Categories: Company Earnings, News