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Tesla fourth quarter preview and expectations



  • Tesla has published a strong quarter of 2018 – the fourth quarter should also be profitable, but weaker than in the previous financial period.
  • It will be interesting to see whether quarterly revenue continues to make significant improvements — Tesla's revenue in the third quarter was almost $ 7 billion.
  • More difficult questions for Tesla are how it will meet its capital requirements in 2019.

Tesla reports revenue for the fourth quarter and the entire year in 2018 on Wednesday after the call.

After the search was published in the third quarter, with revenues of about $ 7 billion and a much larger than expected Tesla profit in the fourth quarter.

But I already have too difficult questions. In fact, there are two things you know before the company reveals the numbers, and CEO Elon Musk will talk to Wall Street analysts and try to better hide his barely hidden (and, perhaps, justified) contempt:

  1. Tesla will publish quarterly earnings.
  2. This will not be as big a profit as in Q4.

This is it! That's all you need to know! There is nothing more to see here!

Yes, if Tesla can manage profit in Q4 – about $ 1 per share versus almost $ 3 per share in Q3 of 18 – this will be the first consistent positive result in history. Given that the losses in the first half of 2018 were huge, the annual profit would have been almost impossible.

Read more:Elon Musk was right – Wall Street's view of Tesla is boring and boring.

I will be more focused on revenues, which increased significantly in the third quarter of 2018 thanks to significantly increased deliveries of the Tesla Model 3 sedan. If Tesla can overcome the $ 7 billion barrier, considering its sales targets for 2019, it is possible that the quarter from 10 billions of dollars will be sold before the end of the year.

Playing defense with the analysis of "be easier"

Tesla Shop.
Tesla cars stand outside the Brooklyn, New York Auto Show and service center in August.

My analysis of “be simpler,” to be honest, is something of a defensive maneuver. Tesla has already telegraphed some pressure on earnings in 2019, and stocks are already evaluating weaker bottom-line results. they fell below $ 300 a few weeks ago when Musk issued profit warnings, and the company announced layoffs. In January, shares fell by more than 12%.

This would mean a potential problem for the tranche of Tesla convertible bonds – valued at $ 920 million – due March 1. The conversion price is about 360 dollars, and, as reported, Tesla will satisfy the bondholders with a combination of cash and capital. Obviously, there may be more cash in the picture if revenues for the first quarter do not bring the stock closer to this mark of 360 dollars.

Sooooo … probably will be discussed whether Tesla is going to raise capital in 2019, either at the expense of equity, or by issuing new debts. Then this question will go to Tesla's balance, where the company had $ 3 billion in cash at the end of the third quarter of 2018 (which, by the way, is three times more than Tesla historically tended to finish the year).

This is where things really get complicated.

Yes, Tesla can sell new shares. At prices below $ 300, investors will surely want to buy them. I do not know why the company has not done it yet.

And yes, Tesla could issue a new debt. His sale of junk bonds in 2017 was carried out on more favorable terms, which most high-yielding borrowers could not dream of, and brought $ 1.8 billion. I'm not sure why the company didn’t do that either. Car companies have an insatiable appetite for capital and pay debts all the time. This becomes a problem only if sales are completely charged.

Finally, Tesla can always issue some auto rental securities, as it did in the past, and get additional deposits for new cars, such as the compact Model Y SUV, which is likely to be presented this spring.

Getting enough money to run a business is a problem, but it's a good problem. For Tesla, the alternative is a bad business that is not worth doing. This is a bad problem, but not a single Musk & Co. is struggling with it.

As you can see, as soon as we miss what should be a promising, but less impressive 4th quarter earnings report, we can move on to more significant implementation tasks in 2019. Tesla did not do so much work on this issue in 2018. The coming year should be better.


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