Tesla Motors Inc Earnings Preview: Focus on Growth

Tesla Motors Inc (NASDAQ:TSLA) is scheduled to release its next earnings report on Nov. 5 after closing bell. Deutsche Bank analysts are expecting losses of 6 cents per share, including a 6-cent per share charge in connection with drive train warranties. That charge was retroactively applied during the third quarter.

What to expect in Tesla’s earnings report

In a report dated Oct. 28, 2014, analysts Rod Lache and Patrick Nolan and associate Mike Levin note that Tesla said previously that it expected marginal non-GAAP profitability before the warranty charge, based on 7,800 deliveries. As a result, their earnings estimate is in line with Tesla’s guidance. The Deutsche Bank team thinks that of Tesla’s projected 7,800 deliveries, 300 of them will be leases.

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They spoke with Tesla Motors Inc (NASDAQ:TSLA) management earlier this week and said that as a result of those comments, they think global volumes were on target. They also think that the most important thing for investors to focus on is the growth trajectory. For example, they said increases in production and demand and the timing of the Model X and the Model III will be important for growth.

Also costs are an important factor, and they think Tesla may be able to lower battery costs faster than most believe, which means even more opportunities for growth.

Room for upside in Tesla’s earnings report

The analysts also see some potential positives in Tesla Motors Inc (NASDAQ:TSLA)’s earnings report next week. For example, investors have been worried about shorter lead times and also customers putting off purchases because of the Model S P85D. They don’t expect the automaker to change its third quarter or full year unit guidance and expect the new leasing partnership to strengthen its position further.

They also think the model mix could be better than expected and that the P85D launch could boost average transaction prices in the fourth quarter. In addition, they note that Wall Street hasn’t factored in benefits from sales of pre-owned Tesla sedans, which they add is another unique opportunity for Tesla compared to traditional automakers.

Potential negatives

On the negative side, the Deutsche Bank team said Tesla Motors Inc (NASDAQ:TSLA) could push back the timing of the Model X from spring or summer of 2015 to the fall. Also they note that the euro rate during the third quarter represents a headwind compared to the July exchange rates, although the yen could partially mitigate that effect.