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Why Is Tesla (TSLA) Up 3.1% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Tesla (TSLA). Shares have added about 3.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Tesla due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Tesla Puts Up a Stellar Q1 Show 

Tesla reported earnings per share of $1.24 in first-quarter 2020, as against the Zacks Consensus Estimate of a loss of 22 cents. This outperformance stemmed from higher-than-anticipated automotive revenues, which came in at $5.13 billion, beating the consensus mark of $4.47 billion. The bottom line also compares favorably with the prior-year quarter’s loss of $2.90 per share.

During the reported quarter, net income attributable to common shareholders amounted to $16 million as against the net loss of $702 million recorded in the year-ago quarter.

Revenues increased to $5.98 billion from the $4.54 billion registered in first-quarter 2019. Also, the revenue figure surpassed the Zacks Consensus Estimate of $5.37 billion.

During the first quarter, Tesla reported delivery and production of 88,496 and 102,672 vehicles, reflecting a year-over-year increase of 33% and 40%, respectively.

Total automotive revenues surged 38% year over year to $5.13 billion in the reported quarter.

Energy generation and storage revenues decreased from $325 million in first-quarter 2019 to $293 million in the first quarter. Services and other revenues were up 13.6% year over year to $560 million.

Tesla’s first-quarter 2020 automotive gross margin was 25.5%, shrinking 538 basis points (bps) from first-quarter 2019.

Financial Position

Tesla had cash and cash equivalents of $8.1 billion as of Mar 31, 2020, compared with $6.3 billion as of Dec 31, 2019. This increase was mainly driven by a $2.3-billion capital increase.

Net cash used by operating activities amounted to $440 million in first-quarter 2020 compared with $640 million of net cash used in first-quarter 2019. Capital expenditure increased to $455 million from the year-ago quarter’s $280 million, mainly due to investments in the Gigafactory Shanghai and Model Y preparations in Fremont.

Model 3 & S/X Update

In first-quarter 2020, Tesla reported Model 3/Y production and deliveries of 87,282 and 76,266 units, reflecting a year-over-year increase of 39% and 50%, respectively. During the March-end quarter, the production rate of Model 3/Y continued to improve.

The Model S/X production and deliveries totaled 15,390 and 12,230 vehicles, up 9% and 1% year over year, respectively.

Outlook

Tesla is making efforts to improve vehicle deliveries, sequentially and annually, with some expected fluctuations from seasonality. For full-year 2020, the company expects vehicle deliveries to exceed 500,000 units. However, amid the coronavirus-related setbacks, Tesla refrained from providing any profit or cash-flow forecast. The EV maker expects to ramp-up production of Model 3 in Shanghai and Model Y in Fremont through second-quarter 2020 and start deliveries from both locations by 2021. Furthermore, deliveries for Tesla Semi are anticipated to begin in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -37.84% due to these changes.

VGM Scores

Currently, Tesla has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tesla has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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