Tesla Motors Inc (NASDAQ:TSLA) will come up with the second quarter earnings on August 7 after the market closes, and is expected to report in line results, says a report from Wedbush by analysts Craig Irwin and Min Xu.
Tesla 2Q estimates
For the second quarter, analysts from Wedbush expect revenue to come in at $385 million and EPS of $0.21 per share compared to consensus $396 million and EPS of $0.16. Tesla Motors Inc (NASDAQ:TSLA) has provided guidance of loss on delivery of approximately 4,500 vehicles because the factory will produce around 5,000 vehicles but hundred vehicles out of that will be in transit to European customers. In the first quarter, Tesla Motors Inc (NASDAQ:TSLA) posted its first profit on delivery of 4,900 vehicles.
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According to the report, total delivery of Model S should be 4,700 units in the second quarter. Gross margin is expected to be at 18.0 percent; increasing 90bps quarter over quarter (Q/Q) fueled by benefits in factory efficiency and reduced vehicle rework before or after delivery. This will be counterbalanced by minor headwind from under absorption of overhead for the inventory build and a less favorable options mix.
Report expects increasing possibilities that Tesla Motors Inc (NASDAQ:TSLA) will achieve gross margin targets of 25 percent, in the fourth quarter of 2013, excluding credits, which will be the most important item on the call. Roadster from Tesla will be a significant growth driver. Production cost, primarily on assembly efficiency came down by $45,000 per vehicle during the production of Roadster. Tesla Motors Inc (NASDAQ:TSLA) will thus be able to make a road map for Model S where the company has greater control.
Ample opportunities ahead for Tesla
WedBush reiterates “Neutral” rating on the Tesla Motors Inc (NASDAQ:TSLA)’s stock with a price target of $110. The research firm has based its target on “25.0x 2017E EPS of $7.00 and discounting back 4 years” using a 12.5 percent discount rate. Additionally, it is believed that valuation based on 2017 estimates is suitable as it will be the first year when Gen-III vehicle volumes are expected to scale. The 25 times EPS multiple is apt as Tesla Motors Inc (NASDAQ:TSLA) should be in growth trajectory. Since the electric car maker will be in the growth stage, there will more potential for further market penetration and diversification of models.
Battery cost in the future is estimated to come down, which in turn will fuel strong growth for Tesla Motors Inc (NASDAQ:TSLA) and the Gen III vehicle target costs, which will be partially offset by persisting doubt in intermediate and longer term sales volumes. Analysts added that they expect a higher rate of market penetration, in addition to Tesla Motors Inc (NASDAQ:TSLA)’s loyal early adopters.