Autos

How Analysts Look at Tesla's Earnings

Perhaps the most interesting thing about Tesla Motors Inc.’s (NASDAQ: TSLA) earnings report is how little difference it ultimately will make in the way investors view the company and its stock. The electric car maker posted a second-quarter adjusted loss of $1.06 per share, more than double consensus estimates, and revenues came in a little short as well.

Earlier in the week the company confirmed its purchase of SolarCity Corp. (NASDAQ: SCTY) for $2.6 billion in an all-stock transaction, and shares dipped by 40% to a weekly low on Tuesday. By Friday, even given the lackluster earnings report, shares were down just over 4% for the week.

On Friday the company said it needed $1.1 billion in cash to finish its Nevada Gigafactory and ramp up production for the Model 3 due out next year. That’s about half the company’s liquidity at the end of June, and it virtually guarantees a capital raise in the near term.

Still, as Barclays analyst pointed out in Barron’s:

But these negatives don’t seem to matter: Tesla is less driven by earnings results today than it is on future prospects. While we continue to see risk to the future prospects painted by the bulls, we don’t see anything in this result that otherwise changes this outlook, as bulls can still walk away feeling confident in the long-term outlook.

S&P Global reiterated its Sell rating on the stock with this observation:

While TSLA is likely now on track to meet original second half deliveries plans, recent news regarding CEO Elon’s Musk’s Master Plan update and the planned purchase of SolarCity … cause us to question how long until, if ever, TSLA reaches sustainable non-GAAP profitability.

“If ever?” Tesla has had the high-end of the market for electric vehicles to itself for going on three years now, and that’s about to change as well. A report at Bloomberg News notes that Mercedes-Benz is planning to challenge both Tesla and German-rival BMW with a lineup of at least four electric vehicles of its own. The first is expected to be unveiled at the Paris Auto Show next month, but two sport utility vehicles (SUVs) and at least one more sedan are also in the plan, according to the report.

Tesla’s stock closed at $230.03 on Friday, in a 52-week range of $141.05 to $271.57. The consensus price target on the stock is $240.08, and the highest listed target is $500.