Tesla will be releasing its second-quarter financial report as well as hosting a Q&A session with investors on August 1. The roughly two-hour earnings call will be live streamed on the company’s website shortly after markets close that Wednesday at 5:30 p.m Eastern.
This quarterly report comes hot on the heels of the California-based electric car firm meeting its 5,000 Model 3 cars a week production goal. But it also follows CEO Elon Musk’s controversial Twitter dispute with Vernon Unsworth — a man that played a key role in the rescue of 13 people that were trapped in a Thai cave.
Even for Tesla — which has been known to put on more fireworks filled earnings calls than most companies — it promises to be a major event. The main question will be whether recent controversies outshine some of the quarter’s milestones.
1. Tesla Predictions: Is Tesla Model 3 Production Pace Sustainable?
Hitting the heralded 5,000 Model 3s a week goal was a monumental effort by Tesla employees across the board, so much so that Wall Street isn’t convinced that Musk can keep it up. In a June 28 research note Goldman Sachs shared with Inverse, four analysts laid out what they expect to hear from the automobile company come August.
“We see the possibility for Tesla to meet the objective, given incremental assembly lines added to the Model 3 program,” states the note. “However, the question that will remain is how sustainable that run-rate of production is for 3Q18 given the historical volatility of the Model 3 production rate, where Tesla has taken intermittent downtime.”
In other words, analysts believe that Tesla was able to hit its goal because it kicked its production into overdrive, and wonder how they can sustain that pace.
2. Tesla Predictions: Investors Are Looking For Profits
Now that Tesla has shown it is capable of cranking out 5,000 Model 3s a week, some analysts believe investors will begin to look towards another benchmark: cash flow. The company recently laid off about 9 percent of its workforce in pursuit of profitability, a move Musk explained as being essential to the company’s mission.
“Profit is obviously not what motivates us,” Musk said at the time. “What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable.”
In its call, Tesla will have to open up its books and show its investors how that’s going.
3. Tesla Predictions: Path to More than 5,000 Per Week?
A route towards turning a profit could be further stream lining Model 3 production, which is precisely what Baird equity research analyst, Ben Kall, believes could happen.
“We think there is a chance Tesla announces a pathway to continue to expand production, which would likely be a positive catalyst,” he said in a statement. “We think there is an offchance Tesla could provide additional information on a potential path to further increasing production, [beyond 5,000 per week] ahead of expectations.”
This is more of a bullish stance on Tesla’s future than Goldman Sachs — who have traditionally been more bearish on the electric-car company. Presenting a plan on how to further bolster Model 3 production could be the key to boost investor confidence and a surge in profits.
4. Tesla Predictions: Will the Cash Burn Stop?
New Street Research analyst Pierre Ferragu — one of Tesla’s biggest bulls — believes Musk is on his way towards spending less and making more.
“The balance sheet doesn’t look good and the cash burn of the last four quarters has been enormous — but they are at a turning point,” he said in an interview with Business Insider. “I think they’re going to more than halve the cash burn in Q2 and they are indeed going to stop burning cash toward the end of this year, which means that they don’t need to raise on that kind of time horizon.”
During that same interview, Ferragu explained that other Wall Street analysts are too fixed on production goals when they should be paying attention to how much market share Tesla can box out from traditional auto companies.
5. Tesla Predictions: Potential Backlash from Thai Cave Comments
While this was not mentioned in the Goldman Sachs note that predates the controversy, it is possible that Musk’s recent Twitter altercation could be brought up on the call.
Musk tweeted, and then deleted, a serious accusation of Thai cave rescuer Vernon Unsworth, calling him a “pedo,” before subsequently apologizing for the remark. Musk is no stranger to controversial behavior, but said in a recent Bloomberg he plans to try to “say nothing more often.”