Tesla (TSLA) will report first quarter fiscal 2019 earnings results after the closing bell Wednesday. Investors are eager to see whether the luxury electric car manufacturer, which is seen its stock fall 21% year to date, compared with the 16% rise in the S&P 500 index, can reverse the slide.
The reason for the decline? After two straight quarters of surprise profits, CEO Elon Musk has warned investors that a profit should not be expected this quarter, while saying the company could return to profitability in the second quarter. Wall Street is now bracing for a big loss, while focusing on the company’s quarterly operating margins. The company’s cash burn rate and ability to reach its 2019 shipment guidance will also be key areas of focus.
In the three months that ended March, Wall Street expects Tesla to report a per-share loss of 69 cents on revenue of $5.33 billion. This compares to the year-ago quarter when the loss came to $3.35 per share on revenue of $3.41 billion. For the full year, ending in December, the company is expected to earn $2.72 per share, compared to a loss of $1.33 a year ago, while full-year revenue of $26.24 billion would rise 22.3% year over year.
Beyond the top- and bottom-line numbers, the focus of the quarter is going to be on the level of demand the company has generated for its vehicles, namely the Model 3 sedan — Tesla’s most affordable model and the company’s attempt at producing a mass-market vehicle to compete with the likes of General Motors (GM) and Ford (F). In March, the company announced plans to not only cut the price of its flagship Model 3 sedan, the company announced plans to reduce the price for all Tesla models.
The news also included the company’s plans close many of its retail stores worldwide. It appears Tesla was radically shifting its strategy. The uncertainty pushed the stock lower about 9%. It was an overreaction and time to add more shares. As for the current quarter, there are some who suggest the company could (or should) use Wednesday’s platform to generate excitement about its product pipeline for 2019.
If the confidence projected by Musk serves as indication, Tesla is poised for a solid year. At the company’s “Autonomy Investor Day” event on Monday, Musk promised to have self-driving cars on the road by next year. While offering an update on the company’s self-driving technology and the company’s “master plan” through 2020, Musk said ,“All Tesla cars being produced right now have everything necessary for full self driving.” Adding, “It’s now just a software question.”
Musk was referring to a chip Tesla has designed over the three-year period called an Autopilot chip, which is currently included in most Tesla vehicles. For those who doubt the company’s ability, Musk offered this: “Sometimes I’m not on time. But I get it done. The Tesla team gets it done.” You can rest assured the company will be asked about these comments on Wednesday.
Tesla shareholders have experienced a bumpy ride so far in 2019. But with the stock down more than 21% year to date, the risk-versus-reward scenario now favors the long side, making this a good buying opportunity.