Stock Falls 5% as Tesla Reports Rapid Growth, $267-Million Loss
Tesla Inc. saw its stock fall 5% this week after reporting a $266.7 million operating loss on revenue of nearly $2.3 billion in the last quarter of 2016.
The company also announced that CFO Jason Wheeler is leaving the company, with various news reports pointing him toward another private sector job or a “public policy” position as a lobbyist.
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Although Tesla’s revenue grew “a phenomenal 88%” in Q4 compared to the previous period in 2015, “investors have little hope of profitability in the first half of the year,” Seeking Alpha reports. “Tesla is taking on large capital expenses to support the Model 3 production ramp and to build out support infrastructure,” and even so, it’s considered unlikely the company will meet its target of producing 10,000 Model 3s per week in 2018.
Seeking Alpha digs into the company’s quarterly financial report, describing it as “just plain ugly. Scary ugly.” Revenue was down 1% from Q3, auto production was off slightly to 24,882 vehicles, expenses were up 27%, and only some of the added cost was attributed to Tesla’s SolarCity acquisition, “so the worst is probably yet to come.”
“Tesla said in a letter to shareholders that automotive gross margins declined for three reasons,” CNBC reports. “First, it was hurt by some delays in the deployment of premium updates to its auto-pilot software. Secondly, it suffered from unfavourable foreign exchange rates, and third, it had an increase in the sale of fixed assets,” related to its preparations for Model 3 production.
Yet CEO Elon Musk said the company still plans to ramp up production, invest US$2 to $2.5 billion in the first half of this year to support its Model 3 launch, and choose sites for three more battery gigafactories.
“How does Tesla afford all this when it’s bleeding cash?” asks analyst Mark Hibben. “Cash consumed in operating activities was $448 million in Q4. Can you say capital raise? Elon can, and he did during the conference call. He couched it in terms of wanting to ‘minimize risk.’”
When an analyst asked how the company would increase production from 2,000 to 10,000 vehicles per week over such a short span, “Musk hemmed and hawed,” Hibben adds. “The fact is that no one will really know how fast Tesla can produce the Model 3 until it starts to produce them.”