Wednesday, Tesla announces its third quarter earnings. Lately, there has been a lot of debate as to what these will be.
There is no question that the company’s revenues have been steadily going up. The Bloomberg consensus expects the third quarter revenue to be $884 million, more than twice of what it was a year ago —the third quarter of 2013 was $431.3 million.
Yet, a spark of contention arose a week ago, and it will only be quenched with the earnings release and subsequent investor conference call on Wednesday afternoon: based on data from WardsAuto, an industry publication, the Wall Street Journal reported that through September, the units of Tesla Model S sedans sold had declined by 26 percent compared with 2013.
Soon after, Elon Musk, CEO, published a tweet stating that September’s sales in North America were up 65 percent year-over-year. He used this tweet to refute the article, even though the Wall Street Journal was reporting yearly sales, something that Musk didn’t address in his tweet.
Tesla’s closing stock price on Tuesday was $238.93. Since the beginning of the year, when it was $150.43, it has gone up by almost 59 percent. From a standpoint of what it was a year ago, it has gone up by more than 35 percent, from $176.81.
“I don’t think it’s cheap,” says Efraim Levy, equity analyst at Standard & Poors. “There’s enthusiasm beyond the fundamental.”
In fact, Tesla’s soaring stock price cannot be explained by its current earnings. The company’s net income has remained negative throughout, except for the first quarter of 2013. A net loss of $38.8 million dollars is expected this quarter by Bloomberg analyst consensus; just slightly worse than the $38.5 million loss a year ago.
Expected earnings per share after adjustment will be close to $0 —in fact, fractions of a cent below zero. If it happens, it will be the second best quarter in terms of EPS since, again, the first quarter of 2013—every quarter being negative except for that one. The EPS GAAP (general accepted accounting principles) is estimated to be a loss of 34 cents per share. A year ago, the loss was of 32 cents per share.
Unlike its competitors in the auto industry, Tesla has profited from tremendous hype surrounding its stock value. At the end of the day, Tuesday, Ford Motor Co.’s stock was trading at $13.94 while General Motors Company’s was at $30.81.
Tesla, unlike other companies does not release monthly sales. It expected to deliver 7,800 cars in the third quarter.
If Wednesday’s earnings release proves to be disappointing, it will probably affect the company’s overvalued stock. But if they are as good as the CEO’s tweets seem to imply, Tesla will keep riding the wave.