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Tesla Q4 Loss Wider than Expected; 2016 Outlook Upbeat

Tesla Motors, Inc.TSLA reported adjusted loss (excluding one-time items other than stock-based compensation expense) of $1.29 per share in the fourth quarter of 2015, much wider than adjusted loss of 48 cents recorded in the year-ago quarter. Moreover, the loss was significantly wider than the Zacks Consensus Estimate of a loss of 34 cents.

The company's fourth-quarter 2015 adjusted results exclude the impact of non-cash interest expenses related to convertible notes and other borrowings of 20 cents per share, and deferred gross profit of 95 cents for Tesla's Model S cars due to lease accounting. On the other hand, Tesla's fourth-quarter 2014 adjusted results excluded the impact of non-cash interest expenses related to convertible notes and other borrowings of 17 cents per share, and deferred gross profit of 21 cents for its Model S cars due to lease accounting. Including these items, the company reported a net loss of $2.44 per share in fourth-quarter 2015, compared with a net loss of 86 cents in the year-ago quarter.

Adjusted revenues increased 59% to $1.75 billion in the reported quarter but fell short of the Zacks Consensus Estimate of $1.80 billion. On a reported basis, revenues jumped 26.9% to $1.21 billion.

Tesla delivered 17,478 cars, including 206 Model X vehicles in the reported quarter, in line with the expectation of 17,000-19,000 vehicle deliveries. Meanwhile, the company manufactured 14,037 vehicles in the quarter.

In the fourth quarter of 2015, the electric automaker directly leased 881 cars worth $85 million of aggregate transaction value.

Revenues (on a reported basis) from Automotive sales rose to $1.12 billion in the quarter from $890.4 million a year ago. Revenues (on an adjusted basis) were $1.65 billion in the reported quarter. Services and Other revenues (on a reported basis) increased 47% to $97.4 million from $66.3 million in the year-ago quarter.

Tesla's fourth-quarter 2015 adjusted gross margin was 20%. Adjusted Automotive gross margin was 25% in the quarter.

2015 Results

Tesla reported adjusted loss (excluding one-time items other than stock-based compensation expense) of $3.84 per share in 2015, much wider than adjusted loss of 96 cents recorded in the prior year. Moreover, the loss was significantly wider than the Zacks Consensus Estimate of a loss of $2.78 per share.

Adjusted revenues went up 47% to $5.29 billion in 2015 but missed the Zacks Consensus Estimate of $5.35 billion. On a reported basis, revenues were $4.05 billion in 2015.

Financial Position

Tesla had cash and cash equivalents of $1.20 billion as of Dec 31, 2015, compared with $1.91 billion as of Dec 31, 2014. Long-term debt totaled $2.64 billion as of Dec 31, 2015, compared with $2.41 billion as of Dec 31, 2014.

Cash outflow from operating activities amounted to $524.5 million in 2015, compared with $57.3 million a year ago. Capital expenditures increased to $1.64 billion from $969.9 million in 2014.

Model 3 Update

The development of Model 3 is on track. Tesla plans to unveil it on Mar 31, 2016. The vehicle's production and deliveries will start from late 2017.

Tesla Energy Update

Tesla is witnessing rising interest for its energy products. In order to cater to this demand, the automaker shifted their production to the Gigafactory in the fourth quarter of 2015. Production of both Powerwall and Powerpack is progressing smoothly at the Gigafactory.

Tesla Energy recorded positive gross margin for the quarter. The company expects a steady increase in gross margins over the year, driven by an increase in volume and reduction in costs. This will also lead to positive cash contribution for Tesla.

Outlook

For 2016, Tesla expects faster growth in deliveries. The company expects to record positive cash flow and adjusted profits this year. In addition, Tesla anticipates that its cash balance at the end of 2016 will increase from the 2015 level. The company will invest around $1.5 billion to enhance production capacity and start cell production at the Gigafactory. The investment will also help the company in the installation of Model 3 vehicle production machinery, the opening of about 80 retail locations and service centers, together with energizing about 300 new Supercharger locations.

Tesla plans to deliver around 80,000-90,000 new Model S and Model X vehicles in 2016. The electric automaker also expects that the transaction price will increase marginally in 2016. In the first quarter of 2016, the company anticipates deliveries to increase 60% year over year to 16,000 vehicles. The company will directly lease almost the same percentage of vehicles as it did in the reported quarter.

In 2016, automotive gross margin is expected to improve, backed by cost reductions for Model S and higher margins from Model X. By the end of 2016, gross margin from Model X should be around 25%. The company also expects further improvement in Model X margin in 2017.

In the first quarter of 2016, operating expenses are expected to increase marginally from the fourth quarter of 2015, as the company focuses on expense management. For 2016, operating expenses are estimated to increase by 20% due to development expenses related to Model 3.

Zacks Rank

Currently, Tesla carries a Zacks Rank #4 (Sell). Better-ranked automobile stocks include Visteon Corporation VC , Wabash National Corp. WNC and Superior Industries International, Inc. SUP . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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