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Tesla (TSLA) Q2 Loss Wider than Expected, Revenues Beat

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Tesla Motors, Inc.TSLA incurred adjusted loss (excluding one-time items other than stock-based compensation expense) of $1.54 per share in the second quarter of 2016, much wider than adjusted loss of 82 cents in the year-ago quarter. Moreover, the loss was significantly wider than the Zacks Consensus Estimate of a loss of $1.16 per share.

The company's second-quarter 2016 adjusted results exclude the impact of non-cash interest expenses related to convertible notes and other borrowings of 23 cents per share, and deferred gross profit of 32 cents for Model S and Model X due to lease accounting. On the other hand, Tesla's second-quarter 2015 adjusted results excluded the impact of non-cash interest expenses related to convertible notes and other borrowings of 14 cents per share, and deferred gross profit of 49 cents for Model S and Model X due to lease accounting. Including these items, the company reported a net loss of $293.2 million or $2.09 per share in second-quarter 2016, compared with a net loss of $184.2 million or $1.45 per share in the year-ago quarter.

Adjusted revenues improved 31% year over year to $1.56 billion, surpassing the Zacks Consensus Estimate of $1.52 billion. On a reported basis, revenues jumped 33% to $1.3 billion.

Tesla delivered 14,402 cars in the reported quarter, of which 9,764 were Model S and 4,638 were Model X. The company manufactured a record 18,345 vehicles in the quarter, up 18% from the first quarter of 2016. Production rate had also increased to around 2,000 vehicles per week by the end of the quarter.

In the second quarter of 2016, the electric automaker directly leased 1,132 cars with aggregate transaction value of $117 million.

Revenues (on a reported basis) from Automotive sales rose to $1.18 billion in the quarter from $878.09 million a year ago. Revenues (on an adjusted basis) were $1.5 billion in the reported quarter.

Services and Other revenues (on a reported basis) surged 15% to $88.2 million from $76.9 million in the year-ago quarter.

Tesla's second-quarter 2016 adjusted gross margin was 20.8%. Adjusted Automotive gross margin was 21.9% in the quarter, up 200 basis points from the first quarter due to improved manufacturing for Model X and favorable pricing for Model S.

TESLA MOTORS Price, Consensus and EPS Surprise

TESLA MOTORS Price, Consensus and EPS Surprise | TESLA MOTORS Quote

Financial Position

Tesla had cash and cash equivalents of $3.25 billion as of Jun 30, 2016, compared with $1.20 billion as of Dec 31, 2015. Long-term debt totaled $3.25 billion as of Jun 30, 2016, compared with $2.65 billion as of Dec 31, 2015.

Cash outflow from operating activities amounted to $99.3 million in the first half of 2016, compared with $291.3 million a year ago. Capital expenditures decreased to $511.6 million from $831.2 million in the first half of 2015.

Business Expansion

Tesla's net new vehicle orders went up 67% in the reported quarter. Model S was the market share leader in North America and Europe among all comparably priced sedans.

On Aug 1, 2016, Tesla announced a deal to acquire SolarCity for $2.6 billion in an all-stock purchase.

In Jul 2016, Tesla held the official opening of the Gigafactory in Nevada. However, the factory is only 14% complete.

In order to support the rising demand for its vehicles, Tesla is expanding its sales network, service and Superchargers. The automaker plans to open one new retail location every four days during the rest of the year.

Model 3 Update

Tesla has completed the design phase of Model 3 and started tooling, production planning and validation. The company will start building the Model 3 body and general assembly centers later this year. The vehicle's high volume production and deliveries will start from late 2017.

Outlook

Tesla is targeting 50,000 vehicle deliveries in the second half of 2016. The company plans to produce 2,200 vehicles per week by the end of the third quarter and 2,400 vehicles per week in the fourth quarter.

In the third and fourth quarters of 2016, adjusted and reported automotive gross margins are expected to improve by 2-3 percentage points, backed by cost reductions as well as improving production efficiency of Model S and Model X.

Operating expenses in the third and fourth quarters of 2016 are expected to increase from the second quarter. For 2016, operating expenses are projected to rise by 30% due to engineering, design, and testing expenses related to Model 3 supplier contracts, and higher sales and service costs associated with expanding geographically.

Tesla expects capital expenditure for 2016 to be around $2.25 billion to support the production ramp-up for Model 3.

Zacks Rank

Currently, Tesla carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company GT , Johnson Controls Inc. JCI and Gentex Corp. GNTX , each carrying a Zacks Rank #2 (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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