Don’t expect a profit heading into Tesla Motors Inc.’s (NASDAQ:TSLA) earnings report, but that doesn’t mean you shouldn’t expect big things from the Silicon Valley car company.
Valuing shares in a stock that’s yet to post a profit is like throwing darts at balloons at the carnival. You feel like you should be able to do it (and you can every now and then), but you’re going to lose a lot of money in the process. Still, this is what we know going into Tesla Motors Inc.’s (NASDAQ:TSLA) earnings report that’s due after trading hours on Tuesday:
1) An upside surprise. Tesla reported a loss of $0.38 per share in Q3. Analysts were calling for a wider loss of $0.43 per share. Revenue grew by $2.8 million last quarter, and investors were clearly cheered as the stock rose 40 percent on the news. Its since given back all those gains.
2) Another loss on the way. Analysts are calling for a loss of $0.50 per share in Q4. If we get another pleasant surprise (meaning the company’s frittered away less money than analysts thought), we’ll likely see another surge in the company’s share price.
3) Tax credits could boost the bottom line. Nothing concrete has happened yet, but the White House has floated the idea of offering a $7,500 tax incentive for electric vehicles. If such a measure passes, it will, undoubtedly, benefit Tesla, and that should have a positive impact on the stock.
4) Beautiful lines. Tesla’s Model S is gorgeous. I don’t care if you’re talking about gas, bio-diesel or propane-powered tractors, the Model S will be one of the sexiest vehicles on the road when it debuts next year. That should drive strong sales, even with an expected retail price around $57,000.
5) Share dilution anyone? Tesla’s pushing hard to get its third car, the hush-hush all-electric Model X SUV on roads by 2014, but they’re going to need a cash infusion to do it. “It could be a secondary [offering] or a strategic investment,” Tesla CEO Elon Musk said last week. “There is no shortage of interest.” If the company can surprise investors to the upside on Tuesday, a dilutive stock offering would be better received than it would on the heels of bad news. Maybe that’s their plan?
6) Keeping your enemies close. Rather than trying to strong-arm its way into the auto industry, Tesla has worked hard to position itself as a car maker and a parts supplier. Toyota gave Tesla a good deal on its sprawling NUMMI plant in California. In exchange, Tesla landed a gig as the power train supplier for Toyota’s RAV4 EV. If the RAV4 sells well, Tesla does well, too – meaning they’ll have more (much-needed) revenue to add to their balance sheet. The company has also forged partnerships as a battery supplier for the Mercedes A-Class and Freightliner trucks.
7) It’s not about the numbers. Tesla’s shares aren’t trading on dollars and cents; they’re trading on the assumption that one day the company will be making cash. No one expects a profit anytime soon. As the company adds more vehicles to its line (including a rumored “economy” car after its Model X SUV) and inks more deals as a supplier, expectations will start ratcheting up. Unless fuel prices magically start falling, though, I see no reason why Tesla won’t be able to compete with the world’s largest car companies in the years to come.