Tesla Expected to Report Profit for Quarter as Attention Focuses on China
January 29 2020 - 6:29AM
Dow Jones News
By Tim Higgins
Tesla Inc. is expected to release fourth-quarter financial
results after the market closes Wednesday. Tesla delivered 367,500
vehicles in 2019, a 50% rise from 2018. That met Chief Executive
Elon Musk's goal of delivering between 360,000 and 400,000 vehicles
globally last year. The results have helped fuel Tesla's meteoric
share price rise, putting the company's market value at a level
greater than most of the world's largest auto makers despite
selling a fraction of the vehicles and never turning an annual
profit. Here's what you need to know:
EARNINGS FORECAST: Tesla is expected to post an adjusted profit
of $1.65 a share in the quarter, according to analysts surveyed by
FactSet, compared with an adjusted profit of $1.93 a share a year
earlier. The full-year adjusted-per-share loss is expected to come
in at 54 cents.
REVENUE FORECAST: Revenue is expected to fall to $6.99 billion
in the quarter, according to FactSet, from $7.23 billion a year
earlier. Tesla said earlier this month that total vehicle
deliveries reached a record 112,000 during the period, up sharply
from early 2019 when sales disappointed and investors questioned
whether demand for the electric car company's vehicles had peaked.
The expected fourth-quarter revenue drop highlights a challenge for
Tesla as it focuses on delivering its new Model 3 compact car,
which on average sold for an estimated $47,700 last quarter. The
older Model S large sedan and Model X sport-utility vehicle, which
traditionally sold for around $100,000, have seen softer demand.
Combined deliveries of the most expensive models fell to a combined
19,450 vehicles in the fourth quarter, down from 27,550 a year
earlier.
WHAT TO WATCH
THE ROAD AHEAD: Wall Street will be looking for the company to
forecast its expected sales growth for the year. Analysts on
average predict deliveries will rise 27% to 468,000 this year.
Morgan Stanley analyst Adam Jonas expects the company to set a
target of 500,000 to 550,000. Cost improvements and increased
production from Tesla's China factory could drive the car maker's
first full-year profit, Mr. Jonas said in a note. Analysts on
average are predicting that Tesla will report a full-year profit of
$6.78 a share for 2020.
CHINA: Mr. Musk earlier this month celebrated the opening of the
company's Shanghai assembly factory, its first outside the U.S.
Tesla has already begun delivering China-made Model 3 cars to
customers there. Investors will be looking for details on how
efforts to increase production there are going, including
sustaining the goal of making 3,000 vehicles in China a week. All
that comes amid concerns that demand in China for new vehicles has
been waning. The overall new vehicle market has fallen two years in
a row in China and deliveries of electric vehicles struggled last
year as the government pulled back on subsidies. Tesla needs to
outperform the market. China remains "the key fuel in the growth
engine" for Tesla, Daniel Ives, an analyst for Wedbush Securities,
told investors. "2020 represents a pivotal year for Musk &
Co."
CORONAVIRUS: Just as Tesla is looking to boost production in
Shanghai, the company joins others in facing the uncertainty
brought about by the spread of the coronavirus. Car companies are
bracing for disruption with the epicenter of the virus affecting
central China where the auto industry has a large footprint.
Investors could be looking for details on Tesla's China supply
chain and how it might be affected. Even without the threat of the
coronavirus, Wall Street has been trying to better understand
Tesla's plans for sourcing batteries for its China factory.
MODEL Y: In October, Tesla revealed that its plan to begin
production of the Model Y, a compact sport-utility vehicle based on
the same platform as the Model 3, were ahead of schedule.
Production is expected to begin this summer. Investors will be
looking for details on how that effort is going.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
January 29, 2020 06:14 ET (11:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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