Tesla Inc (NASDAQ:TSLA) Earnings Model
Author: Jesse Barke, Published: October 18, 2019 9:40pm Category: Earnings Preview (Prior to the 3Q2019 earnings release)
This earnings model is primarily driven by changes in the Automotive Segment. Building on the record production and delivery numbers of vehicles, powered mainly by Model 3, I am forecasting stronger sales and overall earnings compared to the previous few quarters.
This ramp in model 3 delivery and production should help the company reach its projected total delivery objective of between 360k and 400k. The realistically achievable lower bound of that projection would represent significant year-over-year growth to the tune of approximately 50%.
The weekly target delivery of 7000 model 3 cars is forecasted to be achieved in 2020, but although the long-term goal of 10,000 cars is not likely in the foreseeable future as demand will likely not be substantial enough to justify such numbers in the next year.
The reportedly imminent production start of the Gigafactory 3 plant should help ramp up the production of Model 3 vehicles. China could be an attractive market for the cheaper version of the model, although a lack of prompt-resolution of trade tensions between the United States and China could lead to headwinds.
The forecasted increase in gross profit in the second half of 2019 should also help improve operating income though I foresee increases in both R&D and SG& as Tesla strives to introduce newer products (Roadster, Model Y, Pickup, Semi…etc.). We should expect to see some production/delivery of the new vehicles as early as this year and more meaningful delivery numbers starting in 2020.
With the increase in vehicle production and delivery coupled with rising revenues in the second half of 2019 in both the Energy Generation and Storage and the Services and Other segments, I expect EPS to improve over the next few quarters which should help stabilize and possibly improve the recent Tesla’s recent stock performance.
This ramp in model 3 delivery and production should help the company reach its projected total delivery objective of between 360k and 400k. The realistically achievable lower bound of that projection would represent significant year-over-year growth to the tune of approximately 50%.
The weekly target delivery of 7000 model 3 cars is forecasted to be achieved in 2020, but although the long-term goal of 10,000 cars is not likely in the foreseeable future as demand will likely not be substantial enough to justify such numbers in the next year.
The reportedly imminent production start of the Gigafactory 3 plant should help ramp up the production of Model 3 vehicles. China could be an attractive market for the cheaper version of the model, although a lack of prompt-resolution of trade tensions between the United States and China could lead to headwinds.
The forecasted increase in gross profit in the second half of 2019 should also help improve operating income though I foresee increases in both R&D and SG& as Tesla strives to introduce newer products (Roadster, Model Y, Pickup, Semi…etc.). We should expect to see some production/delivery of the new vehicles as early as this year and more meaningful delivery numbers starting in 2020.
With the increase in vehicle production and delivery coupled with rising revenues in the second half of 2019 in both the Energy Generation and Storage and the Services and Other segments, I expect EPS to improve over the next few quarters which should help stabilize and possibly improve the recent Tesla’s recent stock performance.
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Disclosure: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.