Tesla TSLA 0.44% is expected to release first-quarter financial results after the market closes Wednesday. Here’s what you need to know:
EARNINGS FORECAST: Tesla is expected to post an adjusted loss of $1.15 a share, according to a FactSet survey of analysts on Tuesday. That compares with an adjusted loss of $3.35 a share a year earlier. Tesla had already cautioned that the company would swing to a loss this quarter after a profit for the previous two quarters. At one point, Chief Executive Elon Musk had forecast a first-quarter profit but that was before several price cuts to its vehicles, layoffs to slash costs and worse-than-expected deliveries during the period.
REVENUE FORECAST: Revenue is expected to rise to $5.42 billion, according to FactSet, from $3.41 billion a year earlier. Tesla has said total vehicle deliveries reached about 63,000 during the period, a 31% decline from the fourth quarter. The company has attributed the slowdown to the challenges of exporting the Model 3 to Europe and China for the first time. The quarter also marked the first months of sales with the markdown of U.S. tax credits to $3,750 from $7,500. The amount continues to decline this year, going to zero at the start of next year.
WHAT TO WATCH:
SUPPLY & DEMAND: The first-quarter slowdown has analysts questioning whether there is as much demand for the Model 3 as once predicted. Three price cuts to the compact car during the period suggests Tesla could have reached a ceiling on the number of buyers for a vehicle that on average sold for $57,000 last year, according to analyst estimates. Mr. Musk has said he believes there is demand for 500,000 Model 3s each year.
DRIVERLESS: Mr. Musk detailed a plan on Monday to enable more than 1 million cars with fully driverless capabilities next year and to launch a robot taxi fleet in at least one market. With a pivot into the ride-share business, Tesla competing against the likes of Uber Technologies Inc. raises many questions for the future that weren’t addressed, such as anticipated costs for beefing up the company’s infrastructure to support a taxi fleet. Joseph Spak, an analyst for RBC Capital Markets, said “a shared fleet could put greater onus on service, an area where we believe Tesla has already underinvested.”
CASH: Tesla’s limited cash supply re-emerges as an area of concern for investors. Mr. Musk has been reluctant to raise more money, saying the company would begin to generate the cash it needs once it reaches a consistent rate of building Model 3. But a $920 million debt payment last quarter and other costs likely reduced the company’s cash on hand, which was $3.7 billion at the end of December. Analysts surveyed by FactSet on average estimate the company’s negative free cash burn to widen to $896 million. Asked about the company’s cash on Monday, Mr. Musk seemed to suggest his previous guidance of being cash-flow positive every quarter after the first quarter was being overridden by a new plan to pump spending into ramping up production for the robot taxi fleet. He told analysts Tesla would be approximately cash-flow neutral until ramp-up of the fleet globally was achieved. Mr. Musk is likely to face more questions about that.
Write to Tim Higgins at Tim.Higgins@WSJ.com
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