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Tesla share price crumbles 11% as key financials miss the mark

Here’s everything you need to know about Tesla’s second quarter earnings release.

The Tesla Motors Inc (All Sessions) share price crashed 11% in after-hours trade following the release of lacklustre Q2 results.

Improved cash flow couldn’t save the divisive auto-maker from bearish investors – as losses above analyst expectations and weaker deposit levels likely contributed to the aggressive sell-off overnight.

Deliveries increase but key financials disappoint

Tesla Motors Inc (All Sessions) beat second quarter delivery estimates when it updated the market earlier this month. Unsurprisingly, the company reiterated this impressive milestone in the Q2 release, noting that:

‘In the second quarter of 2019, we achieved record deliveries of 95,356 vehicles and record production of 87,048 vehicles, surpassing our previous quarterly records.’

Tesla’s share price rose some 5% off the back of that news.

Though impressive, yesterday’s Q2 release shows that Tesla has failed to meet both analysts’ top and bottom-line estimates.

Specifically, while the company posted strong revenue of $6.35 billion – a 59% increase year-over-year – this result was still below the average $6.43 billion analyst estimate.

Not only that, but according to Bloomberg Data, Tesla delivered far steeper losses than expected, posting an adjusted loss per share of $1.12 – compared to analyst adjusted loss estimates of just $0.31 per share.

Has Tesla lost its lustre?

Given Tesla’s rocky production history, it has never simply been a matter of walking into a showroom and taking ownership of a shiny new vehicle on the spot.

If the core financial metrics discussed above contributed to the sell-off overnight – the revelation that customer deposits fell 18% this quarter, to $631 million – is likely to have made matters worse.

Because potential customers are often required to put down sizeable deposits – and then wait as long as three years for delivery of their vehicle, this metric proves a good indicator of demand for Tesla’s vehicles.

While there may be a multitude of factors that caused this 18% decline in Tesla deposits, it has likely to have at least raised concerns as to how much demand there really is for Tesla’s cars.

Moreover, as investors look towards a world where Tesla faces increased competition in the electric vehicle market, these concerns only have the potential to grow – not decline.

Q2 results not all bad news

Though investors were quick to bid the stock down in after-hours trade, the Q2 release was not all negative.

Specifically, Tesla Motors Inc (All Sessions) posted better than expected free cashflow, has increased its cash and cash investments by 125% since Q1 and is apparently on track to launch both the Shanghai Gigafactory by the end of 2019 and the Model Y by fall 2020.

Speaking of the progress made in China, it was pointed out that:

‘In Q2 we started to move machinery into the facility for the first phase of production there. This will be a simplified, more cost-effective version of our Model 3 line with capacity of 150,000 units per year – the second-generation of the Model 3 production process.’

Tesla's 2019 outlook

The company is expecting to reduce its capital expenditure in the 2019 fiscal year, while also meeting its previous full-year production guidance.

Speaking of vehicle deliveries for the full-year, it was noted that:

‘We are working to increase our deliveries sequentially and annually, with some expected fluctuations from seasonality. This is consistent with our previous guidance of 360,000 to 400,000 vehicle deliveries this year.’

Tesla beating analyst estimates as they concerned deliveries during the second quarter was a positive step forward for the company.

However, with a history of production misses and left-of-field comments from celebrity CEO Elon Musk, investors have a right to be sceptical over a number of Tesla’s forward-facing statements.

That scepticism, as well as top and bottom-line misses are likely to have been the primary drivers of the bearish sell-off that saw Tesla Motors Inc (All Sessions) stock drop 11% overnight.

Regardless of this, since June, Tesla’s share price is up 32% even with last night’s after-hours sell-off.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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