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Will Tesla Report A Q1 Loss? Or A Tiny Profit?

European customers are now really important for Tesla’s future

The most recent message from Tesla CEO Elon Musk to employees about an upcoming reduction of full-time employees by about 7% and words that “the road ahead is very difficult” raised concerns about maintaining profitability by the company.

According to Reuters, analysts expect that:

the profits in the fourth quarter of 2018 will be lower than in Q3 (Q4 report is set on Jan. 30)

there is high probability of “tiny profit” or loss in the Q1 2019

The main issue with Q1 is the shift to production and sales of Tesla Model 3 for Europe and China. Many of those cars will be in transit, so the revenues will be collected with delay in Q2. We guess that from Q2 on, the situation should stabilize.

On the other hand, it seems that Tesla managed to increase production of Model 3 beyond 5,000 per week (maybe even close to 6,000) according to Bloomberg’s Tesla Model 3 Tracker. Moreover, Tesla will sell mostly top of the line versions of the Model 3, which are most profitable, so we would not dramatize too much here.

“Wall Street analysts expect Tesla Inc to forecast a loss for the first quarter when it reports results on Wednesday, having changed their expectations for a profit after Chief Executive Officer Elon Musk warned of a “very difficult” road ahead.”

“The analyst consensus on Jan. 21 turned to a loss for the first quarter and stands at $2.5 million. Analysts on average were expecting Tesla to post a profit of $62.80 million on a reported basis as of Jan. 17, according to Refinitiv data.”

Source: Reuters

This article originally appeared on Inside EVs.

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Income is not profit. Revenue is not profit.

Profit is money in minus money out.

Pay off debt means no profit.

It’s a quarterly loss.

Explain why what you learned in school would allow them to be profitable and still pay off the debt.

Paying off debts is moving cash (or securities) assets to reduce liabilities (debt in this case). These are balance sheet items. They do not affect profit.

Profit is revenue less expenses. Basic accounting 101.
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If they've any sense they'll pile a load of bad news into Q1 once they know they're going to make a loss - store closures, staff layoffs, clear the referral scheme liability as there's plenty of room for that to drag down sentiment with people having waited over a year for rewards, just get it all out the way (although they should be in the figures already, there was talk of them being marketing costs and possibly taken as the rewards are sent out). Q2 can then be more positive and a run of positive quarters. All the costs are going to happen, just account for them in one go rather and than spread them over the year.
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Correct. Fortunately, Tesla has good cash flow.

Some people can't seem to understand that conditions change. For one thing, there are plenty of ways to make the books look good for a quarter or two before the dirt under the carpet shows. We don't know for sure that isn't what happened in Q3-Q4 last year. Sure, they were going to make a profit, but were the numbers fully reflecting reality or was a lot of stuff swept under the carpet to optimize those quarters?

I see this year being the real bell weather. They survived production hell and all the other hells of 2018. Now they need to achieve maturity mode and show continued predictable finances including sustained profits. In other words, "maturity" hell.

I remember 20 years ago I latched onto a CPU maker, AMD. I studied them and Intel hard and came to the realization that they had the same capabilities and the only real difference was that while it took AMD two years to release a noticeably better CPU, Intel did it about every six months. So AMD would be bleeding red ink for a year and a half, then highly profitable for six months while they had the top dog CPU, then back to loosing money. Time it right and you could double or triple your money in a few months. AMD was always risky because they couldn't sustain profits.

That's how Tesla is. But it's not about the details of profits. The variability comes from them not having a clear plan to maintain profitability and having a part-time lunatic at the helm. I wonder if they wouldn't do better without Musk. For sure, it would be an initial blow to the stock price, potentially driving it below 250, maybe even 200. But I wonder if the company hasn't matured beyond the need for Musk at the helm?
It's going to be a HUGE loss because of the debt repayment.

Tesla pays off $920 million convertible bond in cash

People can say it does or does not matter, but it means that they lost a chunk of cash that helps give them flexibility. They have it (had it) and now they have less.

They'll be fine.

That doesn't affect the profit/loss. Paying off a liability just moves money around.

Cash is an issue, but Tesla does have a line of credit against inventory.
That doesn't affect the profit/loss. Paying off a liability just moves money around.

Cash is an issue, but Tesla does have a line of credit against inventory.

Tesla has a lot of things. But now they have one billion less.

BTW, it is not anyone's goal to have a bunch of inventory to borrow money against...
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