Tesla Motors Inc (TSLA) Soars Despite Huge Miss

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Tesla Motors Inc (TSLA) reported earnings this afternoon which missed estimates, but higher guidance investors were happy. Shares of the tech high-flyer were trading up 9.63% in after hours trading to $157.50 a share. As Stifel states: Tesla Motors Inc reported a 4Q15 EPS (non-GAAP) loss of $(0.87) vs. our $(0.04) estimate (Street: $0.16). We note lower total revenues ($1,747.0 mm vs. our $1,785.0 mm estimate), lower total gross profit ($348.7 mm vs. our $391.0 mm estimate), higher R&D expense ($164.8 mm vs. our $138.0 mm estimate) and slightly higher SG&A expense ($264.5 mm vs. our $256.2 mm estimate), all on a non-GAAP basis. TSLA also sold $8.0 mm worth of ZEV credits in 4Q15

On the conference call Tesla Motors Inc CEO, Elon Musk, was upbeat stating:

And it is include sift of the asset back line which I think most accurately regarding slight increase in the margin roughly 1% or thereabouts.
Apart from that, we are positive cash flow.
And then we are expecting to be profitable for 2016 on a non-GAAP basis and I personally think that that is the correct way to think, to look at it.
Because of the way GAAP treats lease accounting.
And nonetheless, despite the lease accounting stuff, we anticipate it being profitable by GAAP centers in Q4 this year.
We are really looking forward to the model 3 next month.
It will be well received.
And getting it into production and delivery at the end of next year.
Touching on a few things that are in the bulk of the newsletter, I think the chart on vehicle demand is really interesting.
And the degree this represents a microcosm of how Tesla vehicles will be received in other vehicle segments, it is extremely well for the future.
The Model S was the best selling premium sedan in the United States last year of any kind.
And our sales actually increased by 51% whereas everybody else was — sales declined.
And the overall market segment declined by about 1%. So, I think this is really rare to see situations like this.
And I think this is despite us being really quite under penetrated in the Northeast.
I think there is a lot of room for growth in the Northeast in particular of the U.S.
and in international markets in general.
So — but essentially, getting to 25% market share of all premium sedans in the U.S.

Analysts react to Tesla Motors Inc earnings


Responding to Tesla Motors Inc (TSLA) earning Barclays opined:

In past quarters, we have drawn upon principles of modern physics to try to understand the asymmetry between the market’s generally positive treatment of the stock with what were disappointing financials. Tesla’s 4Q results show a growing gap between actual results in the past quarter and the rosier outlook, which will nevertheless lead to a positive near-term rebound for the stock.

Outside of delivery volumes, 4Q was below expectations in terms of earnings (87c loss vs. consensus of a 10c gain) and cash flow (on a non-GAAP basis, -$232mn vs. our expectation of -$88mn), hit by both start-up costs on the Model X and a sharper-than-expected rise in operating expense.

Nevertheless, as we’ve seen in the past, the forward outlook is likely more than enough to reinvigorate the bulls, and in the eyes of the bulls renders the 4Q miss meaningless. In particular, Tesla issued 2016 S/X delivery guidance of 80-90k units, above the prior implied guide of 75-85k, and ahead of consensus 79k. Similarly, a rosy picture was painted around the X production ramp – Tesla expects X production to reach 1,000 units/week in 2Q, with gross margins reaching 25% by the end of 2016. Finally, Tesla expects to be profitable on a non-GAAP basis and cash flow positive in 2016, without any need of capital raises, all well ahead of the bearish expectations of analysts such as ourselves.

And perhaps most importantly, with the Model 3 unveil announced for March 31, we now expect a social media frenzy, which will likely reinvigorate the bull case.

While we continue to have the same fundamental concerns we’ve reiterated in the past, today’s print is likely to serve as a boon to the stock – yielding both a near-term short squeeze, as well as renewed interest in the future growth opportunity for Tesla.


Initially we were positively surprised by TSLA’s reiteration of guidance which includes, (a) 80-90k units delivered in 2016, (b) timing related to the Model 3 prototype release and Gigafactory opening, and (c) gross margins of 30% for the Model S and 25% for Model X by year end ’16. We also noted customer deposits ticked higher sequentially, perhaps suggesting demand in tact. Our key questions for management involved further detail on free cash flow expectations, capital expenditure outlook ($1.5 bn vs. our current $1.25 bn model) and need to raise additional capital in FY16 near term (understanding management noted would not need to go to outside sources). We would also be interested in hearing how we should think about modeling Model 3 gross margin based on launch timing, production ramp, Gigafactory benefits, and additional launch costs expected.


Mgmt expects positive FCF and profitability for FY16. They expect to fund $1.5bn in capex without additional capital. Delivery guide for Q1 is 16k and 80-90k for FY (slight trim from 83-93k prior implied guide). Model S margin is tracking to 30% by year-end and Model X margin of ~25%. Q1 opex will increase slightly m/m in Q1 and then ramp up due to Model 3 development. FY opex is expected to be up ~20% y/y.
Q: How would we expect investors to react?
A: We expect TSLA to trade up on their cash flow and delivery guidance.

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