Risk Alert: Tesla Earnings Preview


PREFACE
Hello friends, this is Ophir writing.

Tesla has earnings today after the close of trading. This is one of the “Top Picks” that we have added in pieces. So far we have half a position and are looking to add our final half of a position at lower prices.

As a long shareholder, I actually want the stock to tumble — yes, I want the stock to drop. I’m hoping for some sort of over reaction from Wall Street based on whatever trivial news the mainstream media decides to focus on — like cars door installations or how Elon Musk’s hair looks.

While we have a buy below price of $220 for the “Top Picks” portfolio for just another quarter of a position, I’m actually hoping for a catastrophe. If the stock gets below $190, we’ll just add another half position to make it a full position in total and then sit tight for a few years as Tesla decimates the cynics. If the stock rises on earnings, well, no complaints, we’re already long in the “Top Picks” portfolio — granted at just half a position.

If this sounds like double-speak then that’s good. You are starting to understand how we position ourselves with a proper mindset when the stock market generally looks overbought and the bull market in totality looks long in the tooth.

Now, for details on what to watch for in this earnings report.

STORY
Tesla is expected to widen its quarterly loss but sales are expected to climb by nearly 50%.

The company has a stated goal of delivering between 80,000 and 90,000 vehicles this year, up from 50,000 last year. This would include the delivery of Model X. Last quarter the company missed delivery estimates stating that suppliers for the Model X fell short on their own delivery. The company also assured the market that those issues had already been resolved for this quarter by the time the earnings report for last was actually made.

Elon Musk also assured everyone that while he considered the Model X to be the most difficult car to manufacture ever, that it wasn’t a badge of honor at all. In fact, he called it hubris on his part, and vowed not to repeat the mistake with the Model 3. At CML Pro, we think it was fantastic luck that Tesla went overboard on the Model X, so the Model 3 would be deliverable in mass scale.

It turns out that the company did just that — the Model 3 has been called by some the easiest car to ever manufacture with a steel body and all glass roof. That’s very good news. It’s also exactly what we expect from the CEOs of the companies in our “Top Picks.”

ESTIMATES
The company is facing revenue estimates of about $1.6 billion up from $1.1 billion in the same quarter last year. Further, we will get an update as to whether or not Tesla will in fact turn profitable and cash flow positive for 2016– both milestones that have been a hyper focus for Elon Musk and likely a whipping stick for his CFO. Further, Elon Musk said he no longer needed debt or equity markets to raise capital for the firm — the cash raising stage is over and the company will now stand on its own operations.

That’s it. We’ll see what happens today after the close.

You can access all of the “Top Pick” dossiers as well as our “Companies to Watch” right here: CML Pro Top Picks and Companies to Watch

Thanks for reading, friends.

The author is long shares of Tesla.

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