There's Been A Key Change In Tesla's Earnings Expectations

Tesla Motors Inc CEO Elon Musk unveils a new all-wheel-drive version of the Model S car in Hawthorne, California October 9, 2014. Reuters/Lucy NicholsonTesla is set to release Q3 earnings today

Tesla is set to report third quarter earnings after the market closes on Wednesday, November 5. Elon Musk’s electric car company is getting closer to the release of its Model X crossover, and investors will been keen for an update the timing of the Model X launch.

Thus far the Model X is slated for an ambiguous Spring 2015 release. The Model X crossover vehicle hasn’t been officially priced yet, but it will play a crucial intermediary role in Elon Musk’s plan to bring the electric car to the masses.


Tesla’s strategy can be thought of as an upside down pyramid. When the company began producing its Model S luxury sedan in 2012, production was quite limited and the cars were unobtainable for most with the price point starting around $US70,000. The broad plan is to introduce new vehicles that target wider audiences over time as the company scales up its production capabilities.

Tesla’s longer term goal is to scale up its manufacturing potential to the point where it can make affordable electric cars for the middle class, breaking the average American’s dependence on gasoline powered transportation. Lithium ion batteries have been one chief constraint, but Tesla’s under-construction Gigafactory in Nevada should help to alleviate that bottleneck.


An important part of the process for Tesla is to generate some profits now to help fund its necessary expansion to reach its goal. Like last quarter, today investors and contributing analysts on Estimize are forecasting much better earnings than Wall Street is calling for.

The Estimize community consensus is that Tesla will report earnings of 8 cents per share topping the Street’s view for a break even quarter. Furthermore, on average, contributors on Estimize are expecting Elon Musk and Co. to top Wall Street’s revenue projection by a whopping $US29 million (3.4%).


If we compare to last quarter, the 8 cent differential between earnings estimates from Wall Street and the Estimize community is exactly in-line with the 12c vs 4c discrepancy going into the 2nd quarter of 2014. Tesla ended up missing the Estimize consensus by a penny, reporting earnings of 11 cents.
Although Tesla missed the Estimize consensus by 1 cent in July, it surprised to the upside on sales. After the close the consensus is for Tesla to continue piling up the revenue while maintaining its 3 quarter streak of beating Wall Street’s earnings expectations by a hefty margin.

The key change here is on sales expectations. 3 months ago there was only a $US3 million (<1%) difference in revenue expectations. Today analysts on Estimize are expecting Tesla to ship more units of the Model S and generate way more cash than the Street is forecasting.

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