NEW YORK -- Tesla Inc. is due to release its first-quarter earnings report today, and analysts expect to see losses after more signs of stress emerged at Elon Musk's company for the past three months.
Expectations for the period have been lowered sharply in recent weeks, especially after disappointing delivery numbers were announced earlier this month. That continued the lousy sentiment precipitated earlier in the year by Tesla cutting jobs and vehicle prices and warning of a “ difficult” road ahead. What’s followed has been mounting concern that demand has topped out.
“First-quarter results have already been telegraphed as weak, and we expect investor focus to remain on cash and short-term deliveries,” Roth Capital Partners analyst Craig Irwin wrote in a note to clients on Tuesday. “We think guide needs to point to 85,000-plus second-quarter deliveries for investors to take a neutral view on guidance. If cash is below $2.5 billion, we think investors should be more anxious about a near-term capital raise.”
The question of whether Tesla needs to raise more money has been hanging over the company for a while now, with analysts maintaining that the carmaker needs to bolster its balance sheet. “Investors have increasingly asked about the need for an equity raise; we continue to think Tesla should return to capital markets to strengthen the balance sheet, despite management’s stated desire to avoid issuing new equity,” Baird analyst Ben Kallo wrote in a note. Kallo traditionally has been one of Tesla's most bullish analysts.
Musk has said previously that he didn’t want or need to return to capital markets, though his tune seemed to change during Monday’s autonomous technology-related event. He hinted Tesla probably will need to raise money as it scales its fleet of vehicles he says will be capable of self-driving. Musk also said the company will introduce a robotaxi service of cars that won’t need humans at the wheel in 2020 -- a pronouncement that drew widespread doubts from Wall Street.
“Ultimately we think the event was a way for the company to focus investors away from the underlying demand and margin pressures the company is currently facing as they bring the Model 3 to mass market and as there has been waning Model S/X demand,” Goldman Sachs analyst David Tamberrino wrote.
With the “autonomous smokescreen” now cleared out of the way, clues about demand -- including a potential forecast for second-quarter deliveries -- and margin trends will be the two biggest items to monitor when Tesla reports results after the market close on Wednesday.