Tesla to release earnings as scrutiny grows

The Silicon Valley automaker in November pushed back its 5,000-per-week production goal for the car — from the end of 2017, to late in the first quarter of 2018.(Photo: Win McNamee / Getty Images)

Tesla Inc. is expected to announce Wednesday year-over-year revenue growth of about 40 to 45 percent for the fourth quarter of 2017 if it sales of energy storage systems are factored. But what analysts really will be looking for are clues as to whether the company can hit production goals for its critical Model 3 sedan

The Silicon Valley automaker in November pushed back its 5,000-per-week production goal for the car — from the end of 2017, to late in the first quarter of 2018. The Model 3, with a starting sticker price of about $35,000, has been plagued by production problems. The main bottleneck had been at the Tesla battery plant in Nevada, known as the Gigafactory. Tesla also reportedly has encountered problems with welding and assembly at its Fremont, California, production facility.

David Kudla, CEO and chief investment strategist for Mainstay Capital Management in Grand Blanc, said Tesla has a lot to prove to investors. “We are still waiting for Tesla to transform itself from a tech company to a profitable, high-production manufacturer. They are just not hitting the mark,” he said.

“The key to this earnings announcement will be all about their further guidance on Model 3 production,” Kudla continued. “It is imperative they fix their manufacturing issues and get production ramped up sooner rather than later. Once they demonstrate they can build cars at high production volumes, they then need to show they can build them profitably.”

Tesla reported in November that it sold just 222 Model 3s from July through September. The company attributed the record loss it posted for the third quarter — $619 million — in part to the production problems, although it expressed confidence in the long-term viability of the car.

Tesla lost nearly twice as much money during the period from July to September as the $336.4 million loss it reported in the second quarter.

Share of Tesla were trading at $338.62 during mid-day trading Wednesday. That up 8.7 percent year-to-date, but down from 13.8 percent peak on Jan. 31.

Clement Thibault, senior analyst for the website Investing.com, said in an emailed statement Wednesday that market-watchers have long been mystified by Tesla’s strong stock performance.

“We’ve argued repeatedly that Tesla’s fundamental valuation simply can’t be justified,” he said. “The company has less than $11 billion in (trailing twelve months) revenue, net income of -$1.4 billion, $10 billion in long-term debt of which $5 billion was raised over the past 12 months, and yet the company is somehow worth $58 billion.”

Thibault added: “We’ve also noted in the past that we do not recommend shorting the stock, which is currently selling for $343 per share, since Tesla stock doesn’t respond to fundamental principles of valuation the way most other stocks do. Therefore, keep in mind that old adage, ‘The market can remain irrational longer than you can remain solvent.’”

klaing@detroitnews.com

(202) 662-8735

Twitter: @Keith_Laing

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