ii view: Another big loss hits Tesla hard

by Keith Bowman from interactive investor |

Deliveries are at record levels, but Tesla has lost money again and the shares have tanked.

Second-quarter results

  • Automotive revenue of $5.3 billion, up 60%
  • Net loss of $408 million
  • $5 billion of cash and cash equivalents

Chief executive Elon Musk said:

"In the second quarter of 2019, we achieved record deliveries of 95,356 vehicles and record production. This is an important milestone as it represents rapid progress in managing global logistics and delivery operations at higher volumes."

ii round-up:

Founded in 2003, Tesla Inc (NASDAQ:TSLA) designs, develops, manufactures and sells fully electric vehicles. It also sells solar panels and batteries for stationary storage for residential and commercial use.

Just over two-thirds of its revenues comes from its home US marketplace. 

The carmaker's second-quarter deliveries unexpectedly matched its own target, led by sales of the low-end Model 3. Analysts had widely predicted a miss.

A second-quarter loss of $408 million included an exceptional charge of $117 million for restructuring. This missed analyst expectations, although it was an improvement from the first quarter's loss of $702 million. 

It also announced the departure of its chief technology officer. The share price fell by more than 14%.

ii view:

Record deliveries of vehicles and record production prove that the company is making progress. This growth and operational improvement generated $614 million of free cash flow. It also ended the quarter with cash of $5 billion, the most it's ever had.  

However, investors demand profits, and that still looks a long way off. Group guidance looks for positive net income in the third quarter and following quarters, although volume growth, capacity expansion and cash generation will remain the core focus. It's a sexy industry to be in, but Tesla remains a volatile and high-risk investment.

Positives: 

  • Automotive revenue up 60% year-on-year
  • Model 3 still the best-selling premium car in the US in Q1
  • Morgan Stanley speculates about a spin-out of its self-drive business, possibly worth $8.5 billion 

Negatives:

  • Currently loss making
  • Concerns around rate at which it burns through cash
  • Controversial CEO Elon Musk previously investigated by SEC

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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