Tesla overcame delivery logistics problems to set a quarterly record for deliveries from April through June, and now Wall Street is focusing on whether it will translate into profits.
The electric car and solar panel company said it handed over 95,200 vehicles to customers worldwide, breaking the previous record of 90,700 set in the fourth quarter of last year.
The company rebounded from a dismal first quarter when it delivered only 63,000 of its Model S, X and 3 vehicles, a 31% drop from last year’s fourth quarter.
But many analysts question whether the record sales will turn into profits for the struggling company, and they’re raising questions about demand for Tesla vehicles and its long-term profitability.
CEO Elon Musk has said Tesla will lose money in the second quarter but predicted profits in future quarters. Of 22 analysts polled by FactSet, only four expect a second-quarter profit and 18 predict a loss. The median is for a $227.9 million net loss and a 55-cent-per-share adjusted loss.
Musk told workers last week the company was close to the delivery record toward the end of June, but it was having trouble moving vehicles to the right places.
Cowen analyst Jeffrey Osborne wrote in a note to investors Tesla’s full-year guidance of 360,000 to 400,000 deliveries “reflects an extremely optimistic” second half. The third quarter, he wrote, will give a real picture of how steady demand is for the company’s top-selling Model 3, which starts at $35,000.
He also questions Tesla’s ability to post sustained profits. “We continue to see risks with the company’s growth story, which we believe is likely to be challenged as competition enters the market,” he wrote. “Simply, we see a lot more that can go wrong than can go right.”
Osborne expects Tesla to post a 68-cent-per-share loss in the second quarter and a $3.77 per share loss for the whole year. He does predict profits in 2020 and 2021.
Morgan Stanley analyst Adam Jonas wrote in a note that his investor clients see a large “air pocket” of sales to the start of the third quarter “setting up for a rerun of concerns around demand and cash flow.”
Another problem for future Tesla sales and profits is the phase-out of its federal electric vehicle tax credit. It was $7,500 last year, then cut in half from January through June and is only $1,875 through the end of 2019 before going away completely. That could chase some buyers away, especially if they were looking at the lower-priced Model 3.
Earlier this week, electric vehicle startup Lucid Motors announced that it had named former Tesla Vice President Peter Hochholdinger as vice president of manufacturing. Hochholdinger, who was in charge of part of the operations at Tesla’s Fremont, California, assembly plant, left the company last week.
Tesla lost $702.1 million in the first quarter, among its worst quarters in two years.
Shares of the company rose 7.6% in after-hours trading after the deliveries were announced. They’re up 21% in the past month, but they have been punished most of the year. They’re down 33% thus far in 2019.
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