After initially trading higher following its earnings report this week, Tesla Inc (Nasdaq: TSLA) stock began falling again when investors and analysts raised questions about key financial numbers and the reliability of CEO Elon Musk’s predictions.
Tesla stock initially jumped on Wednesday afternoon after the company reported a much better-than-expected cash burn in the fourth quarter. Tesla reported a $276 million loss in free cash flow after reporting a $1.4 billion loss in the third quarter.
However, analysts were quick to call into question Tesla’s reported number, which was adjusted to include several one-time gains. Bernstein analyst Toni Sacconaghi says Tesla’s actual cash burn in the fourth quarter was about $1.2 billion, roughly in-line with consensus expectations.
Tesla also maintained its near-term Model 3 production guidance on Wednesday. But after repeatedly missing and moving back near-term targets in recent months, Oppenheimer analyst Colin Rusch says that investors should maintain a healthy level of skepticism about Tesla projections at this point. In an interview with CNBC, Rusch says he does not trust CEO Elon Musk’s promises at this point regarding Model 3 production
“We discount what he says pretty substantially,” Rusch said. “We expect them to have ongoing [production] problems.”
Musk originally said Tesla would be producing 5,000 Model 3s per week by the end of 2017. At the end of the third quarter, Tesla bumped that target back from December to late in the first quarter of 2018. In January, the company moved the 5,000-per-week Model 3 target back once again to “the end of Q2.”
While investors are growing increasingly concerned about Tesla hitting its Model 3 targets, Sacconaghi is more concerned about Tesla’s margin targets.
“After stating that Model 3 [gross margins] would be break-even in Q4, the company now expects GMs to be negative in Q1, despite what appears to be a higher volume forecast,” Sacconaghi says. “Moreover, GMs for Model S and X were weak in the quarter, and do not appear to reflect ongoing operating and manufacturing efficiencies that Tesla asserts it is capturing.”
Despite the positive initial market reaction to the earnings report, Tesla finished Thursday’s trading session down 8.6 percent after the market dug a bit deeper below the surface on Tesla’s quarter.
Oppenheimer has…
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