What Wall Street Expects To See In Tesla's Q1 Earnings

If analysts prove prescient, Tesla Inc TSLA’s getting ready to post a $3.27 loss per share on revenue of about $3.31 billion in its Wednesday earnings release.

The firm already reported a deliveries decline and production beat — achievements that further divided the Street’s bears and bulls on the firm’s undefined future.

What KeyBanc Expects To See

The generally ambivalent KeyBanc Capital Markets expects three positives in the first-quarter report: improved production run rates with clarity around the long-term ramp, affirmation that Model 3 demand outpaces production capacity, and favorable gross margin commentary around Models S and X.

“The reason this [latter factor] is so important is because investors will continue to look to S/X as a representative sign that the Model 3 gross margin ramp is at least possible,” analysts Brad Erickson and Elliot Arnson wrote in a note.

By KeyBanc’s assessment, gross margins should improve sequentially throughout the year.

“Cash burn and trajectory of M3 production ramp remain the most likely impediment to the stock moving higher, but we think our earlier points will carry more weight for investors,” the analysts wrote.

Earlier this month, UBS analyst Colin Langan forecast a loss per share of $4.56 with cash burn of around $900 million and a sequential decline in gross margins from 13.8 percent to 11.2 percent.

What The Street Expects Long-Term

Following the quarterly production report, KeyBanc, Goldman Sachs and Morgan Stanley independently predicted Tesla will miss second-quarter production targets.

“No investor that we have spoken to expects Model 3 production of 5,000/week by the end of [the second quarter],” Morgan Stanley analyst Adam Jonas wrote in a note. “We don't expect a 5,000/week run-rate to be achieved before [the late fourth quarter]."

Morgan Stanley also anticipated a $2.5-billion equity raise in the third quarter, the slow addition of 50,000 more employees and eventual integration with SpaceX.

Along with Goldman Sachs and UBS, Bernstein concurred that “another capital raise appears likely,” and Vertical Research Group’s Gordon Johnson predicted a $2 billion to $3 billion raise in the second quarter alone.

Johnson doesn’t anticipate cash contribution until 2022, at which point competition in the car market is seen to abound.

The Ratings

Heading into Wednesday, KeyBanc maintains a Sector Weight rating on the stock but anticipates a short-term boost from earnings.

“We believe TSLA’s 1Q report will likely be a positive catalyst for the stock as sentiment remains quite negative,” the analysts wrote.

Here are other analysts’ most recent ratings:

• Bernstein: Market Perform with a $265 price target;
• Goldman Sachs: Sell with a $195 price target;
• Morgan Stanley: Equal Weight with a $376 price target;
• UBS: Sell with a $195 price target; and
• Vertical Group: Sell with an $84 price target.

Shares of Tesla closed Tuesday at $300.16, up 2 percent on the day.

Related Links:

Study: Tesla The Most Trusted Company In Autonomous Development Race, Despite Crash Investigations

Elon Musk Hits Back At The Economist, Says Tesla Will Be Profitable And Cash Flow Positive In Q3 And Q4