Tesla can after profit with Model 3 increase, investors are looking for more

SAN FRANCISCO (Reuters) – CEO Elon Musk can enter a long promised profit when Tesla Inc ( TSLA.O ) reports results from the third quarter later on Wednesday, when production of Model 3 Electric Sedan takes off, but investors will know if such results are sustainable.

Tesla has attempted to minimize expenses and maximize revenues, cut jobs and restructure while You try to track car sales of the new model 3 to customers, to meet a promise Musk that was first made in May to be cash flow positive and profitable in the third and fourth quarters.

The results will be a turbulent quarter when US security regulators accused Musk of fraud for deceptive tweets and forced him to refrain from the board's role in a settlement.

Bears who sat down for the company celebrated, until noted Citron Research on Tuesday's reverse course, said that Model 3 was a "proven hit."

"While the media has focused on Elon Musk's eccentric, outlandish and sometimes offensive behavior, it has not been possible to notice the legitimate disturbance of the automotive industry currently dominated by Tesla, wrote Lemon.

Palo Alto, California-based automaker's shares, which have fallen 15 percent over the past 12 months, were up 0.5 percent on Wednesday.

Tesla planned its earnings solution earlier in the calendar than usual, most probably because it expects to report a profit, said strategy chief David Kudla.

The main problem for investors will be if Tesla is profitable to build the new model 3, which will increase earnings as volume improves. The Model 3 margins were first "a little positive" in the second quarter, Tesla says after months of production problems.

Tesla delivered 55,840 Model 3s in the third quarter worth more than $ 3 billion in sales at 59.00 $ 0 per car – average price paid without additional charge. There is a significant increase from $ 1 billion in the second quarter.

More sales of the more expensive versions of Model 3, which have cousin margins, will contribute to profitability. All-wheel drive and performance versions help Tesla approach its target of third-quarter 3-margin margins of 15 percent, with 20 percent margin expected for fourth.

For a graphic on Tesla's balance and strategy, click tmsnr.rs/2PPLXM5

LOWER PRICED MODEL 3

Musk can also meet questions later on Wednesday about whether the company will introduce its long-promised $ 35,000 model 3, such as Bernstein analyst Toni Sacconaghi said, was a double-edged sword: if Tesla does not, some customers will get angry, and if done, likely margins will be further squeezed.

Investors are likely to look hard for one-time boosters to the bottom line.

Tesla receives "zero emission vehicle" credits for its electric cars and can sell them to other manufacturers who must meet California regulatory targets. It may have been saving them since it has only paid $ 50 million in such credits this year against the 360 ​​million dollars booked in 2017.

Such credit sales pushed Tesla to a profit in the third quarter 2016, one of two times it has been in the black so far.

If Tesla reduces investment, research and development on future vehicles or new employment, investors will ask if it reflects better efficiency or delay of necessary expenses.

Musk has also promised to be cash flow positive, and investors will see if its rocky delivery system is better. Shortening time cars are in transit so income can hit the books faster, would shorten their account's conversion cycle, increase cash flow.

The incredible CEO is also sure to be pressured on his view, repeated since April, that Tesla does not need to raise new capital. Some analysts have questioned this position, given the financing needs of the many projects on Teslas radar, which includes a model Y SUV, a heavy truck and a new factory in China.

Shanghai Gigafactory, based in East China, aims to produce Model 3 and Model Y cars, with an annual capacity of 250,000 cars, according to a filing.

Some analysts have estimated that the company must increase $ 2 billion by the end of 2018 to fund operations. Between publicly issued bonds and loans from banks and other entities, Tesla has approximately NOK 2.2 billion due November 2019.