4 min read 

Tesla Inc (TSLA:NYQ)  is an American energy company with major concentrations in solar panel and automobile manufacturing that specialises in electric cars and lithium-ion battery energy storage.  It is not unusual for revolutionary automaker Tesla to make the headlines. However, what makes the financial markets and media buzz unusual this time is that the attention is for a significantly unfavourable outcome from the company.

1) Record Quarterly Loss

For the last reported quarter (Q2 2017) the company reported a 336USD million quarterly loss. Despite these losses the company also reported 53% year on year growth in deliveries for Q2 as well as expectation beating revenues of 2.79USD billion.  

The company has only had 2 profitable quarters since the time Tesla was listed publicly.

2) Production – Mass Market

The primary driver for the record quarterly loss has been the increased production costs of selling an electric vehicle at a mass market price point.  Specifically the company has been ramping up the production numbers for the Model 3 – in an attempt to meet the 1800 Model 3 reservations per day level of demand they are currently experiencing.

Tesla Model 3. Source: http://www.caranddriver.com/

3) R&D

Another large factor influencing losses this past quarter is the cost of research and development. The electric car pioneer is investing huge amounts of capital into researching and developing autonomous driving software and this is eating into bottom line.

4) Supply Chain

The company has set an ambitious goal to produce 5000 cars a week by the end of 2017 and this is leading to tougher, riskier, working conditions in factories. Factory workers have lodged official complaints into the safety of Tesla manufacturing facilities and this has the potential to cause a bottleneck in future if the concerns are not addressed.  The company has a track record of setting somewhat over ambitious production targets and failing to meet deadlines.

5) Share Price Impact

Shares plunged temporarily on the news of the huge losses but have quickly rebounded as Elon Musk, Tesla founder, outlined his plans for his future vision for the brand and impressive revenue and demand numbers for the quarter were released.

The setback in earnings performance has not dampened demand for the brands products – with the company recording continued demand for its mass market car, at an average of 1,800 reservations for the Model 3 each day. These facts have contributed to the quick rebound in share price.

TSLA: NYQ  The share price recovered quickly from the initial announcement led downturn. Source: https://markets.ft.com/

Sources:

  1. https://seekingalpha.com/article/4096050-teslas-service-used-car-businesses-running-minus-30-percent-gross-margins
  2. http://news.valubit.com/tesla-burns-a-record-13-million-per-day-in-q2-and-its-about-to-get-worse/
  3. http://ir.tesla.com/secfiling.cfm?filingid=1193125-14-403635&cik=1318605
Trade here

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.


GENERAL RISK WARNING


CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
77% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.