Tesla missed its Q2 earnings targets today in a report released after the close of the market. Tesla executives are not wavering on yearly targets, despite a slower than expected quarter. All of this comes amidst a seemingly never-ending wave of Tesla headlines dominating Silicon Valley over the last few weeks.
The energy company born out of an automobile company reported non-GAAP Q2 revenue of $1.56 billion up from last year’s Q2 revenue of $1.2 billion. The company came close but ultimately missed analyst estimates of $1.6 billion.
Tesla closed down 0.62 percent today at $225.79. After the news was released, Tesla shares moved up almost instantly in after-hours trading after the news dropped but have been fluctuating up and down by 2 percent since.
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Wall Street analysts expected an adjusted net loss of $52 cents a share but found themselves with a worse than expected loss of $1.06 per share.
Tesla delivered 14,402 new vehicles consisting of 9,764 Model S and 4,638 Model X in Q2, slightly ahead of last month’s estimates.
Tesla had originally aimed to deliver 80,000 vehicles by the end of the year. It is growing tougher by the day for the company to hit that goal. On the bright side, the company noted that almost half of Q2 production occurred in the final four weeks of the quarter. Moreover, Tesla had an additional 5,000 cars in transit at the quarter end on their way to be delivered.
Tesla is ambitiously expecting to deliver an additional 50,000 vehicles in the second half of the year. This target keeps them on track to hit the original 80,000 vehicle delivery estimate, despite only delivering approximately 30,000 vehicles in the first half of the year.
The company has invested heavily in its Gigafactory that opened last week and in preparations to launch the hotly anticipated Model 3 next year.
Investors have expressed some angst as Tesla has moved forward on plans to acquire SolarCity and pivot into a vertically integrated energy and transportation company. Hitting targets and staying strong on fundamentals would help ease some investor fears that the company is moving too quickly into a new space rather than fully finishing its mission to deliver affordable mass-market electric vehicles.
Missing targets marginally won’t impact the long term trajectory of the company, but in a world where media spin can be everything, Musk needs a major win on the rollout of the Model 3 to fully recapture investor confidence.
Tesla works with thousands of suppliers and Musk himself said on today’s earnings call that he didn’t expect to reach full volume of production by the self-imposed July 1st 2017 deadline for the Model 3. With thousands of disparate parts, Musk is all hands on deck, even meeting with suppliers personally, to ensure that the company comes as close as possible to that deadline.
Execution on the Model 3 is critical to enable future investment in the grander projects outlined in the company’s second master plan. Musk reiterated on the investor call that Tesla doesn’t have plans to increase capital expenditure until production of the Model 3 hits full volume.
Until then, the Tesla Model S 60 and 60D, have been drawing some customers off the Model 3 waitlist. The vehicles hit a price point between the upcoming Model 3 and older Model S. The Model 60 has seen solid demand but with only a 15-20 percent gross margin. Higher end sports models generate a 30-35 percent gross margin for the company. Musk wants to use vehicle upgrades to increase overall margins, essentially allowing drivers to unlock additional upgrades directly from vehicles.
Hitting the 80,000 vehicle delivery target will serve as a great proxy for those holding their breath on the future delivery of over 400,000 Model 3 pre-orders, and by extension the future value of Tesla stock.