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Tesla (TSLA) Q2 2018 financial report and earnings call: What to expect

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Tesla (NASDAQ:TSLA) is set to release its financial report for the second quarter after markets close on Wednesday, August 1, 2018, followed by its Q2 2018 earnings call at 2:30 p.m. PST (5:30 p.m. EST).

With a vast majority of the second-quarter spent pushing volume production of Model 3, questions are abounding if vehicle demand matches company claims and if Tesla is finally on its way to profitability. Arguably, the elephant in the room will be indicators on whether the company will have to raise more capital due to what Wall Street analysts widely regard as Tesla’s cash flow challenges. Here is an outline of things to expect in Tesla’s Q2 2018 financial results and earnings call.

Tesla’s Losses and Revenue

Considering that the electric car maker continued to invest heavily in the Model 3 ramp over Q2, a consensus among Wall Street analysts suggest that Tesla would be reporting a loss of $2.81 per share. Among 21 analysts, the range for expectations made public about the company’s losses for the second quarter spans from a loss of $3.44 to $1.71 per share.

Wall Street analysts estimate that Tesla would post revenue of around $3.97 billion, which is significantly higher than the $2.79 billion the company posted for the second quarter of 2017. If analysts’ predictions are correct, Tesla would be able to post a year-on-year growth of $42.3%. Ultimately, Tesla’s revenue would be a compelling point in the company’s financial report, validating CEO Elon Musk’s narrative that the electric car and energy company continues to see strong demand in the past seven quarters. Tesla’s revenue has increased sequentially in each of the last six quarters as well.

Model 3 Ramp and Delivery Guidance

Tesla is expected to give an update on the current state of Model 3 production. With the electric car maker managing to hit its self-imposed target of manufacturing 5,000 Model 3 per week in a “burst build effort” during the final week of June, questions are now abounding about the company’s capability to exceed this production rate.

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Tesla’s plans and strategies for the delivery of the Model 3 are also expected to be discussed in the Q2 earnings call. With the company recently selling its 200,000th vehicle in the United States, Tesla would likely provide delivery guidance for the Model 3 as the $7,500 federal tax credit starts its phase-out period.

Tesla Energy

Tesla Energy has slowly been growing in the background as the company’s electric car business stayed in the limelight. Over the past months, Tesla has teased several key developments in its Energy business. During the 2018 Annual Shareholder Meeting, Elon Musk mentioned that the company is on pace to “cross a key battery-cost threshold of $100-per-kilowatt-hour later this year.” Such a milestone could cut the cost of its upcoming products such as the Model Y, while pushing Tesla forward as a leader in battery technology.

Updates on large-scale Tesla Energy initiatives, including a 1 GWh scale energy project that Musk teased in the Shareholder Meeting, as well as the South Australia virtual power plant, would likely be discussed as well.

Financial Guidance

Tesla CEO Elon Musk has made his stance clear during the now-infamous Q1 2018 earnings call that he does not intend to raise capital this year. Musk has also reiterated his prediction that Tesla would be profitable in the third or fourth quarter of 2018. This goal, however, hinges on the successful ramp of the Model 3.

During Tesla’s update on vehicle deliveries for Q1, the company stated that the 5,000 Model 3 per week milestone is expected to lay “the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin, and strong positive operating cash flow.” Tesla’s Q2 2018 earnings call would likely cover how the company plans to hit the green for the second half of the year.

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A webcast of Tesla’s Q2 2018 earnings call could be accessed here on Wednesday at 2:30 p.m. PST (5:30 p.m. EST).

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla tailwinds could drive momentum-filled finish to 2025: analyst

Tesla is heading toward some momentum to finish out the year, one Wall Street firm believes.

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Credit: @heydave7/X

Tesla has some tailwinds that could drive it toward a momentum-filled finish to the year, one Wall Street analyst is predicting.

The tailwinds are joined by some minor risks that have impacted the broader electric vehicle market, but overall, this firm believes Tesla has many catalysts moving forward.

Emmanuel Rosner of Wolfe Research believes that Tesla has plenty of things that could drive the stock upward as we approach the end of the year. With Q3 well underway, Tesla has about five months of catalysts to rely on to erase the roughly 18 percent drop in stock price it has so far this year.

At first glance, it is easy to see the things that would have investors bullish on Tesla for the rest of 2025 and even beyond. Initially, the Robotaxi launch and expansion, which spread to Northern California last night, provide potentially huge tailwinds for the company moving forward.

Tesla expands Robotaxi operation to California’s Bay Area

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Along with that, and slightly related, are the advancements in Full Self-Driving that the company has made over the past few months.

This includes the potential launch of the FSD suite in regions like Europe and Australia, where the company believes it will make some progress on regulatory approval in the coming months.

Finally, Wolfe says the company’s Optimus project, which is expected to enter scale production sometime next year, is the third catalyst for Tesla moving forward.

With these three projects in motion, Tesla truly can begin to work on rebounding from a rough 2025 on the market.

Rosner writes:

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“This name trades more around the narrative than the numbers. And net-net, we tactically see an improving narrative from here. Tesla has several catalysts coming up w/r/t FSD and Robotaxi, including an expansion of their AV service into several new U.S. markets (San Francisco, Nevada, Arizona, Florida, etc.). The company plans to unlock hands-free/eyes-off autonomy for FSD owners in select U.S. locations by YE25. Supervised FSD in China and Europe is expected to launch over the next ~12 months. And, Optimus is expected to enter scale production in 2026.”

Tesla is currently trading around $310 at around 3:20 p.m. on the East Coast.

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Tesla Robotaxi execution should lead to valuation ‘far exceeding current levels’: analyst

RBC Capital bumped its price target on Tesla stock slightly from $319 to $325.

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Credit: @TerrapinTerpene/X

Tesla’s Robotaxi platform is the primary focus for the automaker currently, and based on what has been outlined by the company as goals for the project, one firm is saying that the company’s valuation should “far exceed even current levels.”

The Robotaxi is a self-driving ride-hailing service that Tesla plans to implement in current and future vehicle builds. CEO Elon Musk and other executives have said that “the vast majority of the Tesla fleet that we’ve made is capable of being a Robotaxi,” thanks to its development of Over-the-Air software updates that increase the capability of the vehicle with a simple download.

Currently, the Robotaxi platform is only active in a portion of Austin, Texas, but Tesla is expanding to other markets, including California, Nevada, Arizona, and Florida. California will be the next market to open its doors to the Tesla Robotaxi platform.

But the name of the game is execution, and that’s what Tesla is aiming for in a timely fashion. If it can come through on all of its current goals, its valuation could explode, and one firm is holding steady on that narrative as Tesla continues to work toward expanding Robotaxi.

On Tuesday, RBC Capital analysts bumped their price target on Tesla shares (NASDAQ: TSLA) to $325 from $319, primarily due to the Robotaxi expansion and its success:

“Should Tesla be successful on all of its goals, its valuation could far exceed even current levels. The Austin Robotaxi launch has been better than many feared, and the company is looking to expand in more cities.”

There are some risks to Tesla’s narrative, but they fall outside the scope of what the company can control. In relation to Robotaxi, regulatory hurdles remain. Some regions may be slower than others to give Tesla the proper licensing to operate in their jurisdiction. This could slow the pace of Robotaxi expansion, bringing some overhang to the story.

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Additionally, Tesla is fending off narratives of slowing demand, and the White House’s decision to revoke the $7,500 EV tax credit from consumers could temper sales past Q3.

Nevertheless, Robotaxi is where Tesla’s true value seems to be focused. Successfully launching a driverless ride-sharing platform is where the company is putting all of its eggs, and revolutionizing passenger travel is where the focus lies.

RBC Capital’s note continued:

“Regulatory hurdles remain, however. Further, we expect the end of IRA credits and high levels of used EV inventory to pressure the auto business for the next several quarters.”

The slight price target bump puts RBC Capital’s expectations near where the stock is trading, as it is currently priced at around $320 at 9:54 a.m. on the East Coast.

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Elon Musk shares details on Tesla AI6 production deal with Samsung

Tesla is already laying the groundwork for the ramp of its next-generation products.

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Credit: Tim Zaman/Twitter

Elon Musk has provided some details about Tesla’s AI6 production deal with South Korean tech giant Samsung. As per Musk, Samsung’s upcoming Texas fabrication facility will be dedicated to the production of Tesla’s AI6 chip.

Musk’s update suggests that Tesla is already laying the groundwork for the ramp of its next-generation products like the Cybercab and Optimus.

Samsung AI6 production reports

On Sunday, Bloomberg News claimed that Samsung will be producing semiconductors for Tesla in a $16.5 billion deal. As per the report, Samsung is currently producing Tesla’s AI4 chip, and the deal will help the South Korean tech giant gain some ground back from competitors in the semiconductor market.

Elon Musk confirmed the news on X, stating that the $16.5 billion is actually just the bare minimum. As per Musk, the deal with Samsung will likely be “much more than that.” And in a later comment, Musk clarified that the actual output of Samsung’s Tesla AI6 plant will “likely be several times higher” than what has been reported.

Musk shared a critical detail that would likely allow Samsung to maximize its AI6 output. “Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency. This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house,” Musk wrote in his post.

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Elon Musk on AI5 and AI6

Tesla currently produces vehicles with its AI4 chip, which is produced by Samsung. As per the CEO, Tesla’s AI5 chip, which just finished its design, will be produced by TSMC. The AI5 chip will be produced initially in Taiwan, and then in Arizona, the CEO noted.

Elon Musk’s comments about AI6 and Samsung’s output suggest that Tesla is really preparing to enter a stage in its growth that involves production at a scale that’s never been seen before. Tesla’s speed is quite notable, though it seems safe to assume that the actual rollout of AI6 will still be a few years away. 

In a few years, Tesla will probably be mass producing the Cybercab and Optimus, as well as more affordable vehicles that will likely see more adoption from mainstream customers. This means that Samsung’s AI6 ramp will likely be just in time to support Tesla’s outputs for its Optimus bots, its Cybercabs, and its mass market affordable cars.

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