Why Tesla’s Loss Doesn’t Really Matter

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Tesla Motors Inc. (NASDAQ: TSLA) reported second quarter 2016 earnings after markets closed on Wednesday. For the quarter, the electric car maker posted an adjusted diluted loss per share loss of $1.06 on adjusted revenues of $1.56 billion. In the same period a year ago, the company reported adjusted a net loss of $0.48 on revenues of $1.2 billion. Second-quarter results compare to consensus estimates calling for a per share loss of $0.52 and $1.62 billion in revenues.

On a GAAP basis, the carmaker lost $2.09 per diluted share. Adjusted revenue includes $293 million in deferred revenues resulting from lease accounting.

The carmaker built 18,345 vehicles in the quarter, up 18% sequentially and 43% year over year compared with the year-ago quarter. Tesla delivered 14,402 vehicles in the quarter. The company directly leased 1,132 cars to customers in the second quarter worth $117 million in aggregate value.

Tesla says it “production and demand” are on track to deliver 50,000 Model S and Model X vehicles in the second half of 2016. The company plans to exit the third quarter with steady production of 2,200 vehicles per week and increase the number to 2,400 per week by the end of the fourth quarter.

The company’s battery-making Gigafactory is on track to support volume production of the Model 3 late next year.

At the end of the first quarter Tesla said it expected to deliver 80,000 to 90,000 vehicles in 2016. With 50,000 in the plan for the second half of the year and nearly 29,000 delivered in the first half, the company may actually meet its goal.

Tesla expects GAAP and non-GAAP automotive gross margins excluding zero-emissions vehicle credits to increase by 2% to 3% through Q3 and Q4.

If Tesla can really meet its full-year production targets and its projected margin improvements and keep all its other balls in the air, the company has a chance to reach a new high by the end of the year. Shares have to appreciate by a little more than 26% in order to have that happen, and with Tesla, anything is possible.

Tesla’s shares traded up about 1.8% at $229.80 in Wednesday’s after-hours session. The stock’s 52-week range is $141.05 to $271.57. The 12-month price target for the shares was $241.33 before the report with the highest target set at $500.00.

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