What to Watch For in Tesla Earnings

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Tesla Inc. (NASDAQ: TSLA) is set to release its most recent quarterly results after the markets close on Wednesday. The consensus estimates call for $2.19 in earnings per share (EPS) and $7.07 billion in revenue. The fourth quarter of last year reportedly had a net loss of $3.04 per share and $3.29 billion in revenue.

Deutsche Bank said in a report that believes that Wall Street likely will look past a fourth-quarter profit and free cash flow to focus on Tesla’s outlook for the year and especially for the first quarter. After the recent share decline “reflecting nervousness” about the company’s demand and margin outlook, Deutsche Bank believes the bar has been somewhat lowered, and that if Tesla issues 2019 guidance in-line with Wall Street expectations for 400,000 vehicle deliveries and 23% to 24% gross margin, there could be some relief rally.

Earlier this month, Elon Musk, the CEO and founder, said he could cut his workforce 7%, even though the company needs to increase production of its inexpensive Model 3. Musk did not make it clear how he could both cut staff and increase production.

According to a letter Musk sent to his employees, Tesla may have a “tiny profit” for 2018. That means that after a profitable third quarter, bottom-line results for the final quarter may not be as good. Among the reasons is that Tesla increased its workforce by 30% last year, which Musk said was too much to make a profit in current circumstances.

Excluding Wednesday’s move, Tesla had underperformed the broad markets, with its stock down about 11% year to date. In the past 52 weeks, the stock was down 13%.

A few analysts weighed in on Tesla ahead of the results:

  • UBS has a Sell rating with a $220 price target.
  • RBC has an Underperform rating with a $245 target.
  • JMP Securities has a Buy rating and a $408 price target.
  • Goldman Sachs has a Sell rating and a $225 target.
  • Needham has a Sell rating.
  • Canaccord Genuity has a Hold rating.

Shares of Tesla were last seen up about 1% at $300.14, in a 52-week range of $244.59 to $387.46. The consensus price target is $330.36.