Tesla Motors Inc (NASDAQ:TSLA) shares have gotten pummeled today, losing as much as 12 percent of their value after Goldman Sachs analysts issued an extremely negative report about the company. It may be hard to believe in light of today’s beating, but one columnist believes the automaker’s second quarter earnings report might actually trigger another short squeeze.
Of course it’s widely believed that the first short squeeze occurred at some point after the company’s first quarter earnings report when it reported its first-ever quarterly profit. In his report today, Seeking Alpha contributor Adam Betancourt focused on a few of the important things he thinks investors should look for when Tesla Motors Inc (NASDAQ:TSLA) releases its earnings report on July 25.
ValueWalk's Raul Panganiban interviews JP Lee, Product Managers at VanEck, and discusses the video gaming industry. Q4 2020 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview With VanEck's JP Lee ValueWalk's ValueTalks ·
Tesla’s estimates and emissions credits
According to Betancourt, the automaker will report losses of about 10 cents per share in its next report. However, analyst estimates for the company’s second quarter losses go as high as 18 cents per share.
Nonetheless, one of the many areas of concern bears have raised regarding Tesla Motors Inc (NASDAQ:TSLA) involves the sale of Zero Emissions Vehicle Credits. The company has said it will become profitable without the sale of these credits. In the first quarter of the year, it sold about $85 million of the credits, which gave the automaker’s profits a boost for the quarter. Therefore even if Tesla posts a loss in the second quarter, Betancourt believes that shedding the sale of these credits from its earnings is an important step in the right direction for the automaker.
Tesla grows its production capacity
He also notes that the company’s production capacity is now much more than the 21,000 vehicles it has projected to sell this year. He tracked the Vehicle Identification Numbers (VIN) of the Model S and believes that the company has significantly ramped up its capacity.
This week Tesla CEO Elon Musk said they surpassed the goal of producing 400 vehicles per week, and in fact, Betancourt claims that the company produced 600 units in the last week of June and 542 and 550 units in each of the two weeks before that. In Betancourt’s estimates, Tesla Motors Inc (NASDAQ:TSLA) might be on track to producing 25,000 Model S sedans rather than the 21,000 the company guided for. He says if his estimates are right, then the company might “report a sizeable profit for the year,” although if the company only does its projected 21,000 vehicles this year, it might not even break even.
He also used the VIN tracking to estimate about how many Model S sedans have been shipped. He said the highest one he could find was 17,239, so he expects to hear that about 17,500 units have been shipped so far this year.
Details on the Model X wanted
He also wants to hear more about the Model X, or more specifically, when Tesla Motors Inc (NASDAQ:TSLA) will start producing it. Of course there is plenty of information on the company’s website about the crossover EV, but the exact date when Tesla will begin producing it isn’t there.
He says the specific date (rather than the simple ballpark of late 2014 provided by the automaker) is important because adding a second vehicle will likely slow down the Model S production rate. As a result, it could drag down the company’s 2013 earnings numbers if it starts producing it during fiscal 2013.
Short interest in Tesla remains high
At this point short interest in Tesla Motors Inc (NASDAQ:TSLA) is still quite high at about 31 percent. Bears are extremely focused on the forward P/E ratio, which is extremely high. However, Betancourt believes that Tesla bulls are buying the idea rather than the valuation of the company. He thinks they’re showing support for innovation rather than the numbers behind the company’s valuation.
As a result, he believes that if the results indicate anything close to his estimates, he expects to see Tesla shares start popping again, possibly triggering another short squeeze, especially if the stock appreciates more than 5 percent after the report.