Tesla Motors Inc (NASDAQ:TSLA) is going to release its earnings numbers for the second fiscal quarter of 2014 next Thursday July 31, and the market appears to be pretty confident about Elon Musk’s ability to meet targets. In the last five days of trading the company’s shares have risen by about 2%. Investors may be mis-pricing one risk according to at least one analyst studying the company.
Ben Levisohn over at Barron’s managed to pick one comment from a Wedbush report that should be considered by the company’s investors. When Tesla Motors Inc (NASDAQ:TSLA) shows off its guidance figures for the third quarter on Thursday, how is the factory shut down going to hurt production, and how is the market going to take it?
Tesla factory shutdown a long-term boon
According to Craig Irwin of Wedbush, “the one risk we see in 2Q14 results is 3Q14 unit guidance may be soft versus consensus given Tesla is executing a furlough to reformat the factory for initial Model X production and higher Model S production in 2H14.” The analyst seems certain that Tesla Motors Inc (NASDAQ:TSLA) is going to meet its target for the quarter gone by, but its future guidance may be hampered.
Earlier this week Tesla Motors Inc (NASDAQ:TSLA) revealed that it was halting production in its California factory in order to upgrade its capabilities. Tesla Motors Inc (NASDAQ:TSLA) is releasing a new car next year, the Model X, and it is trying to increase production of the very popular Model S sedan. That means that it wants to upgrade and retool its factory in order to make that transition easier. That’s going to hurt current production, however.
The Tesla Motors Inc (NASDAQ:TSLA) decision to temporarily tone down production was not made lightly, and the company’s future is not exactly threatened by re-tooling. The shut down of the factory was down for good reason, to increase its production capacity heading into what promises to be a very busy 2015. The company’s future is looking bright, but the stock might take a turn on guidance.
The analyst’s comments aren’t about the company’s business, which Wedbush reckons is strong and rates at Outperform with a $275 price target, but about the stock movements directly after the earnings release. Those holding the company’s shares long term don’t have to worry about how factory re-tooling affects guidance.
Tesla earnings set to impress
Tesla Motors Inc (NASDAQ:TSLA) is expected to show earnings of 0.04 for the three months just closed according to analysts’ consensus. Revenue for the period is expected to come in at $817 million and the company is expected to show that it shipped 35,000 Model S units during the three month period. In the same three months of last year the company earned $0.20 on revenue of $552 million.
Tesla is a highly valued company. Its shares are selling for incredible multiples, and reaction after it officially releases earnings numbers is difficult to predict. In the past quarterly releases from the company have brought with them a lot of volatility. This year investors should expect no less from the company’s huge market following.