Should You Buy Tesla Inc Stock After The Earnings Miss?

Can Tesla Inc stock continue to rally in spite of rising uncertainties? 

Should You Tesla Inc (TSLA) Stock After The Earnings Miss


Tesla Inc (Nasdaq:TSLA) yesterday reported its Q4 and FY 2016 earnings. The Palo Alto, California, based company was reporting its first earnings after the $2 billion acquisition of renewable energy company SolarCity (Nasdaq:SCTY). Tesla reported a wider than expected loss but a beat on revenues. The electric car maker said it lost 69 cents a share against analyst estimates of a loss of 53 cents a share. On the revenue front, the company reported $2.29 billion in revenues. Analysts were looking for a revenue of $2.19 billion. The response of Tesla stock to the earnings was comparatively muted. Tesla stock gained by around 1.5% in the after hours. The movement in the stock was much lower than many were expecting. Tesla options had priced in a movement of 6% in either direction (which was higher than usual 5% move).

Tesla Inc's gross margin will bounce back.

Tesla's automotive revenue grew by 78% for the quarter to $1.99 billion. For the full year 2016, automotive revenue was up by 70%. Tesla's total revenue (including solar energy and storage) grew by 73% for the full year. On the profitability front, Tesla's gross margin saw a big decline on QoQ basis. Gross margin slipped from 27% in Q3 2016 to 19% in Q4 2016. There were a couple of reasons for this massive decline. Tesla Inc recognized lower ZEV credits in the fourth quarter. Also, the company had to postpone the recognition of revenues from autopilot upgrade to Q1 2017. Tesla Inc expects Q1 2017 gross margins to bounce back to Q3 2016 levels. The GAAP EPS improved from a loss of $2.44 in the same quarter last year to a loss of 78 cents per share.

Tesla Inc reaffirms Model 3 launch date.

Model 3 remained the main focus of the earnings. Many skeptics have questioned Tesla's ability to abide by the launch plan. In its letter to shareholders, Tesla Inc reaffirmed its commitment to start the limited production of Model 3 by July. However, Tesla is not sure how many cars it can produce. Tesla refused to give the guidance for full-year deliveries like it used to do previously due to the uncertainties around the production of Model 3. Instead, the company provided guidance for the first half of the year. Tesla expects to deliver 47,000 to 50,000 Model S and X units in the first half of 2016. These numbers represent 61% to 71% growth in vehicle deliveries.

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Disclosure: Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a ...

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