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Stock Analyst Update

Strong Demand, More Cash Burn in Tesla's 2nd Quarter

Our fair value estimate remains in place, but we are lowering our 2017 delivery expectations.


We have incorporated  Tesla’s (TSLA) second-quarter results into our model and we are leaving our fair value estimate in place but we are lowering our 2017 delivery expectations to 138,000 from 160,000 based on recent guidance. We continue to model 400,000 in 2018 which could be increased if Tesla meets its guidance of 10,000 Model 3 sedans produced per week early in 2018, though we think that’s unlikely. Model 3 will not bring meaningful results to the company’s numbers until at least 2017’s fourth quarter because third-quarter Model 3 production is guided at just over 1,500 units with a weekly run rate of 5,000 Model 3 sedans by the end of this year. We think the long-term story on what Tesla can achieve in electric cars, trucks, mobility, and energy generation and storage will ultimately determine the value of the company. We think the stock trades on momentum for option value that, if realized, is still many years away, and therefore we do not think any single quarter’s results are critical to the investment thesis.

Second-quarter adjusted EPS was a loss of $1.33, the same as first quarter and better than consensus loss of $1.80. Revenue increased by 120% year over year and by 3.5% sequentially to $2.79 billion, beating consensus of $2.55 billion. Model S and X deliveries increased by 53% year over year but declined 12% from first quarter. Management gave less detailed guidance than in the past by saying Model S and X deliveries in the second half of 2017 will exceed the first-half total of 47,077. We have long been interested to see 2017 full-year capital spending plans which in the first half totaled $1.5 billion and second half is guided to about $2 billion. We calculate Tesla’s cash burn after including cash inflows for sales to third-party lease providers at $1.009 billion for second quarter versus a $436.1 million burn in first quarter. Total cash on hand is about $3 billion and we expect many more debt and equity offerings over time.

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David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.