Tesla Q3 Earnings Preview: Supply Chain Issues Cloud Near-Term Outlook

| About: Tesla Motors (TSLA)

Tesla Motors (NASDAQ:TSLA) will report Q3 results on November 5th.

The Street expects:

  • Revenue: $51 million
  • EPS: $0.90 loss per share
  • Q4 revenue guide: $316 million

There are few surprises heading into the earnings as the company cut Q3 and 2012 guidance late last month. While Q3 and full-year delivery goal might not be as high as the Street's prior consensus, production ramp up for 2013 is likely to be achievable once supply chain issues are resolved.

Weak Delivery Outlook

After much speculation over Tesla's ability to meet its 500 unit delivery target for Q3, the company finally confirmed that such a goal is unreachable and cut its production target to 300+ units, with approximately 200-225 units for delivery in Q3.

The company also guided 2,500 - 3,000 deliveries in Q4, and 2,700 - 3,225 units for the year.

Gross margin will be negative for the upcoming quarter but will turn positive in Q4.

Supply Chain Issues Causes Near-Term Setbacks

According to management, the production delays are mainly due to supply chain issues as the company is still trying to sort out minor logistics, such as door-handle suppliers.

Given that Tesla's mass electric vehicle is a relatively new technology for the market, production delays and supply chain issues should be expected since the company needs to work with a large number of suppliers. I view this as a minor setback because any company that is venturing into a new technological frontier will likely experience similar issues/setbacks.

Model S Deliveries Achievable For 2013

Despite the near-term setback, management expects the 20,000 units Model S target for 2013 to be achievable and plans to exceed its own target with strong oversea sales. Currently there are 13,000 Model S reservations. While the goal could be achievable, investors should note that the current production slowdown is causing a rising number of cancellations and return of deposits. This is concerning in that management may cut guidance again in the near future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Auto Manufacturers - Major, Earnings
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