Is Tesla Moving Away From Profitability?


Tesla Motors is looking to make a mark in the energy storage industry, but many analysts believe that by doing this, the company could be moving further away from profitability. Analysts are continuously lowering their annual adjusted earnings estimates for Tesla for the current and next year.

Tesla earnings estimates lowered

During last year’s May earnings call, Tesla talked about developing a stationary energy storage product. The Palo Alto-based company recently came up with the battery product and is expected to ship the Powerwall and the Powerpack products this year. Analysts were not excited about the company’s roadmap towards profitability on the back of the battery products.

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Wall Street expects revenue for the EV manufacturer to grow 79% to $5.74 billion this year, and subsequently, they expect another 56% of growth to $8.97 billion in 2016. The Street has not yet discounted the news of Tesla’s battery products going up for sale this summer. In contrast, analysts have revised their earnings per share estimates for the current year from $3.38 in November to currently just 29 cents per share. The consensus EPS estimate for 2016 has also followed a similar trend, says the report.

During the February earnings call, Tesla CEO Elon Musk made an attempt to calm down analysts and make them shed their negativity after the company posted weaker than expected sales. Musk, during the call, said the new battery product is complete and that production will start later this year. Analysts, however, were more concerned about the company’s depleting sales performance, weak earnings estimates and sales dropping below the company’s own expectations.

Analysts doubt profitability 

For Tesla, its capital expenditure budget is almost a quarter that of Ford, but this is despite the fact that the veteran automaker makes nearly 40 times Tesla’s revenue. Aegis Capital told Bidness Etc., “They [Tesla] are spending more money on infrastructure and building out new businesses. What that does is it delays earnings further down the road. It [Tesla’s battery business] will take time,” adding that the company’s costly venture into the battery business may delay its return on investment.

Also Bank of America Merrill Lynch assigned a Sell to the stock, suggesting that the profitability for Tesla from selling batteries will not come anytime soon, and even when it comes, the margins will be razor thin, thus requiring heavy sales volume, which will be a challenging task considering the fierce competition in the industry.