Tesla's expectations for delivery, but not enough for profit

Tesla's total third-quarter shipments easily exceeded Wall Street's expectations this week, but a report on the upcoming quarterly results and the departure of Chairman of the Board Elon Musk led analysts to to turn back to the record of the electric car manufacturer.

For the quarter ended September 30, Tesla delivered 83,500 vehicles, exceeding analysts' expectations and forecasts. The output of Model 3, slightly behind the number of shipments to 53,239 for the quarter, is about 4,018 per week over the 13 weeks of the period. In August, Musk said he expects Tesla to produce 6,000 models a week by the end of the month – a rate that, according to the company, should allow him to achieve "sustained quarterly earnings, in the absence of force majeure or economic slowdown, while continuing to grow at a rapid pace."

Wall Street analysts will not be convinced of profitability until they see it in a regulatory filing scheduled for October 31.

"Tough positive, we do not have the belief that [Tuesday’s delivery report] is enough for Tesla to reach its GAAP profitability target for the third quarter, "said in a note to his clients Wednesday George Galliers, an analyst at Evercore ISI, which offers a target price of $ 299 the big picture."

Galliers has estimated that the pace of deliveries – a few thousand vehicles ahead of the planned 80,900 on the street – could generate revenues of $ 488 million and profits of $ 105 million for Tesla's third quarter results in the end of the month, an amount that he said was probably not enough for the company. become profitable.

Tesla's second-quarter earnings, released on August 1, showed negative free cash flow of $ 739 million, resulting in a loss of approximately $ 3 per share. Most analysts take into account a capital injection into their models before the end of the year.

"We doubt that the bridging mode for production and deliveries translates into profitability in the third quarter, but we believe that the move to full transmission production in the fourth quarter could allow the company to reach adjusted profitability in the fourth quarter, although we did not expect GAAP profitability, "said Cowen analyst Jeff Osborne, following Tuesday's announcement. It has an "underweight" rating and a $ 200 price target for the stock.

"We still believe it is necessary to increase by $ 2 billion in the fourth quarter," he added.

The Wall Street consensus on Tesla shares has fallen to more than $ 300 in recent weeks, falling to $ 291, because of the fallout from the Securities and Exchange Commission's lawsuit against Musk and its subsequent settlement. The shares have been in this range, as investors are probably waiting to know who will lead the board in the absence of Musk – a key part of its $ 20 million settlement with the SEC.

The New York Times reported on Tuesday that James Murdoch was considered by some members of the board of directors as a potential replacement, although outside groups such as the attorney's controller, Glass Lewis, worried about the lack of relevant experience. from Murdoch.

The Tesla share is down 5.4% this year.

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