Tesla Motors (TSLA) reports on July 25th.
The Street expects:
- Revenue: $30.65 million
- EPS: $0.93 loss
- Q3 revenue guide: $127 million
Investors should expect an in line result this upcoming quarter given that the company's Model S was just recently introduced in June. Therefore investors should expect meaningful revenue growth from Q3 going forward.
On June 22nd, Tesla officially launched its first Model S and the company plans to produce only one or two vehicles per day for the next several weeks since early models are likely to suffer minor production glitches.
At a recent marketing day in Toronto, Tesla's head of investor relations addressed several issues that are noteworthy to investors:
Safety
Unlike traditional vehicles, the Model S does not have an internal combustion engine, which means that the front end of the car has a larger crumple zone than a majority of vehicles on the roads today. A larger crumple zone also means that the Model S might be the safest car in the world, given that it could absorb a more impact than internal combustion engine vehicles during collisions.
Service
Compared with internal combustion engine vehicles that on average have 100 moving parts, the Model S only has 18, which simplify vehicle servicing in that the company can replace many parts in the owner's driveway.
However, one area of concern is the battery warranty. According to my understanding, the coverage does not include degradation but will only include workmanship defect and parts because residual capacity depends on owner's driving habits.
Because the Model S is such a novel concept, early owners might not properly maintain the vehicle, which could lead to battery failure. The battery would then need to be replaced at the expense of owners. I note that early Tesla Roadster owners who were not careful had to spend $40,000, or ~40% of the vehicle's retail price, for battery replacement due to improper maintenance.
Heading into the earnings, investors should look for additional clarity on the battery warranty because the fear of not being able to properly maintain the car battery might shun buyers and negatively affect sales.
Distribution
Tesla's marketing team aims to own the sales distribution under a franchise model to ensure a standardized car buying experience. As we all probably can relate, car-buying experience is quite painful. However, Tesla hope to deliver a superior experience so buyers can be satisfied and confident with the models.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
