Tesla — probably the most discussed automotive company of the 21st century — is about to disclose its Q1 financial results. The earnings report will be published on May 2. In reality, Tesla is far from being a perfect investment opportunity, as the company demonstrates poor performance in terms of free cash flow and net profit. However, it certainly has decent short-term trading potential.
What to expect from the company and, more importantly, how to trade TSLA shares in the upcoming days and weeks? Read the full article to know.
Financial results
Earnings per share (EPS) are arguably the most important metric for stock price evaluation. Every company’s prime objective is to generate profit. When the company fails to do so it will expectedly go down in price. When it comes to net income and profit margin, Tesla is doing plain poorly. Despite growing revenue, the company has reported a record-high quarterly loss of $675 million in December 2017. Profit margin is currently at -20%, only slightly better than in June 2016. Tesla, however, is a unique case. Even after demonstrating negative results for 5 quarters in a row the company still grows. Over the course of only 8 years the company has appreciated 15 times — enough to make the competitors envious.
Business strategy
At the same time, the company is working hard on improving its business model, bringing new products to the market. Most of them have medium to long-term orientation but can influence the share price already now. Tesla is working on an SUV with an integrated solar panel and its 3rd generation electric car, Model 3. Apart from developing new products, the company is undertaking mergers and acquisitions in order to boost its market share and get access to valuable technologies. Tesla is expanding domestically (in the United States) and globally: its products can be found in many developed and developing countries. The network of superchargers, that power electric vehicles, is growing daily.
Analytical forecast
Experts still can’t decide how to approach TSLA shares. The majority of them believe that the company will demonstrate worse than expected financial performance in Q1 2017. 4 out of 5 Zacks.com experts have revised their EPS forecast to the worse. But it doesn’t necessarily mean that Tesla is destined to decrease in price. The company has never been particularly good with turning a profit, yet somehow managed to expand at a good rate.
What should you expect from TSLA shares when the report finally hits the market? After the last six quarterly earnings reports TSLA stock price first demonstrated a minor dip only to surge higher in the following days. Some say this is enough to expect the same pattern to take place this time, too. However, a certain degree of caution is advised. Being an outlier even in its own industry, Tesla can surprise the investors and peculators alike, and not necessarily for the good.
