Tesla Shares Soar on Anticipation of Third-Quarter Results


TSLA 12.72%

shares soared on Tuesday after it announced plans to report quarterly results sooner than expected, fueling speculation that it has good news to deliver.

Investors are anticipating the coming quarterly report with even more suspense than usual because Chief Executive Elon Musk has promised Tesla would record a net profit and positive cash flow for the three-month period, based on his belief that Tesla could recharge its money-losing operations by sustaining strong output of its Model 3 sedan.

Investors had expected the results to come next week or later, but Tesla late Monday said it would release its third-quarter financial report after the markets close Wednesday. Tesla’s share price, which as of Monday had fallen by nearly a third from its high this year, jumped nearly 13% during Tuesday trading to close at $294.14.

“Game theory suggests the early/surprise reporting is good news,” Adam Jonas, an analyst for Morgan Stanley, said in a note to investors Tuesday. “Tesla is at the most critical point in the ramp of its most important product (Model 3) and is arguably at the most critical point of its liquidity/access to capital since it has been a public company. Why would Tesla pull forward the introduction of adverse news into the market now?”

Analysts broadly have been less confident than Mr. Musk in Tesla’s ability to deliver a profit. They were estimating on average a net loss of 95 cents a share for the latest quarter based on generally accepted accounting principles, according to a survey by FactSet. That compares with a loss of $3.70 a share in the third quarter last year. Revenue is expected to rise to $6.1 billion, according to FactSet, from $2.98 billion a year earlier.

Analysts expect Tesla to report an adjusted loss of 3 cents a share in the latest period compared with $2.92 a share a year earlier, according to FactSet on Tuesday.

If Mr. Musk’s prediction bears out, it would be the third quarterly net profit in Tesla’s 15-year history. Tesla eked out a $22 million profit in the third quarter of 2016, and $11.2 million in the first quarter of 2013. It has never reported an annual profit.

The high stakes for the quarter intensified the spotlight on Mr. Musk, whose series of recent gaffes have raised questions about his mind-set. Most notably, he tweeted on Aug. 7 messages saying he had secured funding to take Tesla private.

The tweets sent shares soaring only to come crashing down as it became clear a deal wasn’t finalized. Mr. Musk recently settled claims by the Securities and Exchange Commission that his tweets misled investors. As part of the settlement, he gets to stay as CEO but must step down as chairman within coming weeks. He isn’t allowed to be chairman for three years. Tesla is expected to announce a new chairman and two additional independent directors soon.

Tesla’s turmoil and Mr. Musk’s episodes have helped fuel short sellers’ argument that the company was overvalued and their bets against it.

A strong showing could be a turning point for opinions on Tesla, Ben Kallo, an analyst for Robert W. Baird & Co., said Tuesday in a note to investors. “While some think it will take several quarters of execution to transform the narrative, we believe a strong Q3 and favorable outlook on the conference call should be sufficient to drive shares higher,” he said.

Some longtime bears were already anticipating a bounce. Citron Research, which has been trading Tesla for five years and has a lawsuit against the company over the go-private tweets said on Tuesday it had changed its view on the car maker, saying its electric cars were “destroying the competition.”

Citron cited Tesla’s sales performance against competitors’ potential for the future, including plans for Chinese and European factories, a compact SUV model and tractor-trailer production, as reasons to look long term.

Tesla earlier this month said total vehicle deliveries in the third quarter reached 83,500, a sharp rise from more than 26,150 vehicles a year earlier, thanks to sustained production of the Model 3 this summer. It said it delivered 55,840 Model 3s in the period. The vehicle, priced lower than other Tesla models, is the cornerstone of Mr. Musk’s bet to transform Tesla from a niche luxury brand into a mass-vehicle manufacturer.

Delays in reaching Model 3 production targets have put increased pressure on Tesla’s limited cash supply, raising concerns among some suppliers about the car company’s financial outlook.

Many analysts expect Tesla will raise more money, in part to help fuel its growth plans. But Mr. Musk has said he doesn’t want to, saying the Model 3 will generate funds.

Investors on Wednesday will be focused largely on Tesla’s ability to generate cash and any guidance it has for fourth-quarter Model 3 production.

Analysts surveyed on average expect Tesla to deliver 66,400 Model 3s during the current period. The company has already said 8,048 small sedans were in transit at the end of the third quarter and will be counted as deliveries in the fourth quarter, suggesting analyst are expecting Tesla to build at least about 58,000 Model 3s in the quarter.

Write to Tim Higgins at Tim.Higgins@WSJ.com

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