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Tesla share price: 5 key investor notes ahead of Q1 2020 earnings

We have picked out five key points that investors should know ahead of Tesla’s earnings release on 29 April 2020.

Source: Bloomberg

US electric car manufacturer Tesla is due to release its financial results for the first quarter of 2020 on Wednesday 29 April 2020 after market close (18:30 ET). Here are five things for investors to know ahead of the upcoming earnings.

1. Tesla’s earnings beat analyst estimates in the last two quarters

Wall Street consensus estimates have Tesla at an earnings per share (EPS) of -US$0.27 per share on the back of net sales of US$6.1 billion.

These predictions are significantly higher than Q1 2019’s reported EPS of -US2.90 per share and sales of US$4.5 billion, which had missed analysts’ projections of -US$1.12 and US$5.5 billion respectively.

However, Tesla’s actualised earnings have beaten analyst estimates in the last two quarters, so the overall expectation is still for a similar outcome.

In terms of share price, Tesla’s share price is still up over 73% year-to-date, despite a drop of over 50% between February and March 2020, when the coronavirus outbreak worsened globally. Prior to the contagion's spread, Tesla shares were trading at an all-time of US$950 per share.

According to IG trading data, Tesla’s stock value has recovered steadily since 30 March, and is back above US$700 per share.

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2. Tesla said Q1 was ‘best ever first quarter’

In the first quarter, Tesla said that it recorded its ‘best ever first quarter performance’ with almost 103,000 vehicles produced and approximately 88,400 vehicles delivered, in an update provided on 02 April 2020 – at the height of the coronavirus pandemic in the US.

Model S/X saw a production output of 15,390 sets alongside deliveries totalling 12,200, while Model 3/Y saw a production output of 87,282 cars and deliveries totalling 76,200.

The new Model Y began production in January, while deliveries rolled out in March, which Tesla says is ‘significantly ahead of schedule’. Additionally, it revealed that its Shanghai factory continued to achieve record levels of production, despite significant setbacks.

3. Final numbers could vary by up to 0.5% or more

Tesla also said that its delivery numbers tend to be on the ‘slightly conservative’ side, as ‘we only count a car as delivered if it is transferred to the customer and all paperwork is correct’.

As such, the company guided that final figures could vary by up to 0.5% or more.

In the same note, Tesla also noted that vehicle deliveries represent only one measure of its financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles.

Other statistics like net income and cash flow results, which will be announced along with the rest of Q1 earnings, will also reveal its true financial performance, the automobile manufacturer emphasised.

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4. Production suspended, but ‘touchless deliveries’ continue

Tesla also provided an operational update on 19 March 2020, in which it announced a temporary suspension on production at its Fremont, California and New York factories from 23 March, after having met with local, state and federal officials to discuss legal directions and safety guidelines.

It added in the same statement that basic operations will continue in order to support vehicle and energy service operations and charging infrastructure, as further directed by the local, state and federal authorities. The factory in New York will continue to operate insofar as those parts and supplies necessary for service, infrastructure and critical supply chains.

Operations of other facilities, including Nevada and service and Supercharging network, remained functional.

Finally, the company has also implemented 'touchless deliveries' in various locations so that deliveries can continue in a seamless and safe way. Customers are now able to unlock their new cars at a delivery parking lot via the Tesla App, sign any remaining relevant paperwork that has been placed in their car, and return that paperwork to an on-site drop-off location prior to leaving.

5. Tesla maintains positive outlook for 2020

In January, just prior to the coronavirus’ global outbreak, Tesla had forecast that deliveries should ‘comfortably exceed’ 500,000 units in 2020, due to a ramp up in production of Model 3 in Shanghai and Model Y in Fremont earlier this year.

Additionally, it forecasted that both solar and storage deployments should grow at least 50% in 2020.

On the whole, the company said it expects positive quarterly free cash flow going forward, positive GAAP net income going forward, continuous production and deliveries growth, capacity expansion and continuous cash generation.

However, these estimates were made before the coronavirus pandemic outbreak and Tesla’s subsequent production halt. Still, the company maintained in the March operational update that believes that its cash position at the end of Q4 2019 at US$6.3 billion – as well as a recent US$2.3 billion capital raise – is ‘sufficient to successfully navigate an extended period of uncertainty’.

‘At the end of Q4 2019, we had available credit lines worth approximately $3B including working capital lines for all regions as well as financing for the expansion of our Shanghai factory,’ Tesla said.

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