Tesla fourth quarter earnings preview and expectations
- Tesla posted a strong 2018 Q3 – fourth quarter should also be profitable, but weaker than the previous financial period.
- It would be interesting to see if quarterly revenues continue to significantly improve – the Tesla top line was nearly $ 7 billion in the third quarter.
- The more complicated issues of Tesla are about how it will satisfy its capital needs in 2019.
Tesla reports fourth quarter and full year 2018 earnings Wednesday after the clock.
Having posted a third quarter of nearly $ 7 billion in revenue and a much deeper than expected profit, Tesla should withdraw in the fourth quarter.
But I already have over complicated issues. There are essentially two things you know before the company reveals the figures and CEO Elon Musk speaks to Wall Street analysts and tries to better hide his barely hidden (and perhaps justified) contempt:
- Tesla will make quarterly profits.
- There will not be as much profit as in the fourth quarter.
That's it! That's all you need to know! Nothing more to see here!
Yes, if Tesla can make a Q4 profit ̵[ads1]1; something in the $ 1 per share ballpark, against nearly $ 3 per share in Q3 & # 39; – it's the company's first successive bottom-up success. Given that losses for the first half of 2018 were massive, a full-year result would be almost impossible.
Read more: Elon Musk was right – Wall Street took Tesla on his leg and boring
I want to be more focused on turnover, which took a big jump in Q3 2018 thanks to a sharp increase supplies of Tesla model 3 sedan. If Tesla can cross the $ 7 billion barrier, given its sales targets for 2019, it's not out of the question of a $ 10 billion quarter to materialize before the turn of the year.
Playing a defense with a "hold it simple" analysis
My "hold the simple" analysis here is, to be quite honest, some of a defensive maneuver. Tesla has already telegraphed some pressure on profits in 2019, and shares are already pricing in weaker results on the bottom line. They dropped below $ 300 a few weeks ago when Musk raised profit warnings and the company announced layoffs. For January, the stock makes up more than 12%.
That will mean potential issues for a tranche of Tesla convertible bonds – worth $ 920 million – coming to March 1. The conversion price is about $ 360, and Tesla has reportedly said it will satisfy bondholders with a mix of cash and equity. Obviously, more money can be in the picture if the revenue in the 1st quarter does not send the shares closer to the $ 360 mark.
Soooo … there will probably be some discussion about whether Tesla intends to raise capital in 2019, either through equity or by issuing new debt. Then the question will turn to Tesla's balance sheet, where the company had NOK 3 billion in cash at the end of Q3 2018 (it is three times that Tesla has tended to end a year with, by the way).
Here are the issues that actually get complicated.
Yes, Tesla can sell new shares. At under $ 300 prices, investors will certainly want to buy them. I don't know why the company hasn't done this already.
And yes, Tesla can make new debts. It's 2017 junk-bond sales were achieved on more favorable terms than most high-yield borrowers could dream of – and brought in $ 1.8 billion. I'm not sure why the company hasn't done this too. Car companies have insatiable appetite for capital and issuer debt all the time. It will only be a problem if the sale is absolutely thought.
Finally, Tesla can always put out some auto-lease-backed securities, as before, and take in more deposits for new cars, such as the Model Y compact SUV that is likely to be unveiled this spring.
Getting enough money to run your business is a problem, but it's a good problem. For Tesla, the option has a failing business that is not worth driving. It's a bad problem, but not a Musk & Co. is in conflict with.
As we can see, when we exceed what is to be encouraging if less spectacular Q4 revenue reports, we can move on to the more material challenges that will be implemented in 2019. Tesla did not do so well on it in 2018. The coming year must be better.