Tesla Motors Inc (TSLA) Earnings August 7: What To Watch

Tesla Motors Inc (TSLA) Earnings August 7: What To Watch
<a href="https://pixabay.com/users/Blomst/">Blomst</a> / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) is scheduled to release its next earnings report August 7, and investors will be examining this one closely. It follows the company’s first profitable quarter in history, although analysts are expecting to see the automaker return to losses for the quarter.

Tesla Motors Inc (TSLA) Earnings August 7: What To Watch

Trefis analysts see significant downside for Tesla Motors Inc (NASDAQ:TSLA) shares and have a $69 per share price target. They will be paying particular attention to three key areas in the company’s earnings report.

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Gross margins must show progress

The analysts note that while Tesla Motors Inc (NASDAQ:TSLA) did report gross margins of 17.1 percent in the first quarter, those margins included sales of Zero Emission Vehicle credits. When excluding the positive impact from those credits, the margin would have been less than 6 percent. Chief Executive Officer Elon Musk said last month that they would achieve a 25 percent margin without the sales of those credits, so in this next report analysts will be expecting to see significant progress toward that goal.

Trefis analysts also remain concerned about Tesla’s long-term goal of remaining at 25 percent gross margins. They believe that the Generation III vehicle, which will be the company’s mass market vehicle, will have smaller margins. As a result, they don’t think the company can make this long term gross margin goal.

Tesla could meet unit sales projections

Tesla Motors Inc (NASDAQ:TSLA) raised its sales projection for the Model S this year from 20,000 units to 21,000. Management has indicated that demand for the vehicle is greater than supply, and Trefis analysts believe it will be able to sell all of the vehicles it produces this year. They believe that if the automaker increases its production level to more than 21,000 vehicles this year, it will probably sell all of those vehicles.

They remain concerned though about average revenue per vehicle. They’re predicting a 2 percent decline in average revenue per vehicle. This is because management has indicated that this time around, the company sold more of the 60 kwh Model S vehicles, which are priced lower than the 85 kwh models. During the first quarter, it sold more of the higher priced models, which led to an average revenue per vehicle of almost $115,000.

Tesla’s operational efficiencies should improve

We heard recently that Tesla Motors Inc (NASDAQ:TSLA) has greatly improved its operational efficiencies, surpassing its goal of producing 400 Model S sedans in a week. Trefis analysts note that last year the company’s adjusted selling, general and administrative expenses were $129 million, or 400 percent of the automaker’s gross profits. They’re looking for this report to indicate these expenses to be around $190 to $200 million or about 32 to 33 percent of the company’s expected gross profits.

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