Why Is Tesla (TSLA) Down 21.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Tesla (TSLA). Shares have lost about 21.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tesla due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Tesla Earnings and Revenues Miss Estimates in Q1

Tesla reported loss per share of $2.90 in first-quarter 2019, wider than the Zacks Consensus Estimate of loss of $1.21. The company recorded loss of $3.35 per share in the prior-year quarter.

During the reported quarter, net loss attributable to common shareholders amounted $702.1 million compared with the year-ago net loss of $709.6 million.

Revenues increased to $4.5 billion from $3.4 billion registered in first-quarter 2018. However, the figure missed the Zacks Consensus Estimate of $5.8 billion.

During the quarter under review, Tesla’s vehicle production and delivery numbers registered sequential declines of 10.9% and 31%, respectively. The company managed to produce around 77,100 vehicles — consisting of 62,950 Model 3, and 14,150 Model S and X. Out of the total delivered figure of 63,000 units, Model 3 accounted for 50,900 while Model S and X were 12,100.

Total automotive revenues, including revenues from automotive sales and leasing, increased 36% year over year to $3.7 billion in the reported quarter.

Energy generation and storage revenues decreased from $410 million in first-quarter 2018 to $324.7 million in the reported quarter. This decline was mainly due to lower solar deployments.

Services and other revenues increased 87.1% year over year to $492.9 million.

Tesla’s first-quarter 2019 automotive gross margin was 20.2%, increasing 43 basis points (bps) from first-quarter 2018.

Energy generation and storage gross margin decreased 606 bps on a year-over-year basis to 2.4%.

Financial Position

Tesla had cash and cash equivalents of $2.20 billion as of Mar 31, 2019, compared with $2.67 billion, as of Mar 31, 2018.

Net cash used by operating activities amounted to $639.6 million in first-quarter 2019 compared with $398.4 million of net cash used in first-quarter 2018. Capital expenditure declined to $279.9 million from $655.7 million in the year-ago quarter.

Model 3 Update

The Model 3 production increased 3% in first-quarter 2019 on a sequential basis. This modest improvement in production rate was due to changes in the production process for the launch of new variants of Model 3, fewer working days and supplier limitation.

The company began production and deliveries of Model 3 vehicles for the international markets during first-quarter 2019. In order to quickly meet overseas demand, Europe and China Model 3 builds occurred in the first half of the quarter while US Model 3 builds occurred in the second half.

Outlook

Tesla reiterates 2019 vehicle delivery guidance of 360,000-400,000 vehicles. The company targets to produce 500,000 vehicles globally in 2019.

Again, Energy generation and storage revenues are likely to increase considerably due to the storage business. Further, the Services and Other business is set to grow in 2019 on account of rise in fleet size and used-car volume.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -36.98% due to these changes.

VGM Scores

Currently, Tesla has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Tesla has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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