Tesla Motors Third Quarter Results

Tesla Motors (TSLA) stock rallied on Wednesday after reporting better than expected guidance for the fourth quarter. The company's third quarter results were worse than what analysts expected. However, the company expects to deliver enough vehicles in the fourth quarter to meet their full-year delivery projection for the year. This is great for investors of the company who were beginning to fear that the company would fail to deliver what it projected. Tesla CEO Musk on the conference call discussed the new Model S autopilot. They also discussed how they are on track with their low cost Model 3.

Tesla reported Non-GAAP revenues and EPS of $1.24 billion and a loss of $0.58 cents lower and higher than what analysts expected.
Analysts expected the company to report Non-GAAP revenues and EPS loss of $0.48 cents. However, this didn't result in shares falling thanks to the company's better than expected guidance for car delivery for the fourth quarter. Tesla continues to face challenges in gaining quarterly profitability. On the other hand, the company has seen its operating leverage improve and the company expects it to continue to improve during the next several quarters.

The company is expecting to have a huge fourth quarter with the company meeting its 2015 car delivery estimates. To hit its full-year delivery estimates the company need to deliver 17,000 cars in the fourth quarter. However, investors and the market in general didn't believe the company could hit its car delivery guidance. The company will probably hit the low end of its guidance for car delivery. In the fourth quarter the company is expecting to deliver 17,000 to 19,000 cars to customers.  The company's fourth quarter guidance implies a 47% to 67% growth from the previous quarter last year.

Key Updates:Tesla Results Based GAAP Accounting Standard:

Tesla uses non-GAAP accounting which excludes certain definitions, revenues and lowers its earnings loss. However, based on GAAP accounting the company reported a net loss of $230 million or $1.78/share. This is higher than the net loss in the third quarter last year of $74 million or $0.52 cents. Analysts expected the company to use $95 million based on GAAP accounting standards.  The company is bleeding cash as its works on costly projects ranging from its charging networks and retail stores. In the third quarter, Tesla raised $245 million in a new stock issued over the summer.  The company issued mores stock to raise money to help stop the bleeding of cash. However, Tesla did for the first time since the second quarter of 2014 to increase its cash reserves to about $1.43 billion. Even after increasing its cash reserves, its still $900 million lower than in the third quarter of last year.

Investors are underestimating the company's bleeding of cash and its use of non-GAAP accounting. The company is using accounting gimmicks to understate their losses and inflate their revenues. It seems that the market and investors are willing to overlook these problems.
Published on Nov 16, 2015
By Cody Eustice
Cody is a freelance writer who has been writing financial articles for various sites for over a year now. He is a value investor looking for companies that sell for far less than their estimated business value.

Copyrighted 2020. Content published with author's permission.

Posted in ...