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Can Tesla Gain Momentum in 3Q15?

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Nov. 2 2015, Updated 1:08 p.m. ET

Tesla’s momentum

Although Tesla (TSLA) hasn’t been making profits, the company has been able to show strong growth in shipments and revenue. The company generated adjusted revenue of $955 million in 2Q15. According to data compiled by Bloomberg, analysts expect Tesla to post revenue of $1.24 billion in 3Q15. This represents a YoY (year-over-year) growth of 46%. In 3Q15, Tesla shipped 11,580 vehicles. This was 49% growth compared to the same quarter last year. Currently, Tesla forms 0.54% of the PowerShares QQQ Trust, Series 1 ETF (QQQ).

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Momentum

Tesla has been able to maintain the momentum in its revenue. You can see this in the above graph. However, the YoY revenue growth rates fell in the last few quarters. In 3Q14, Tesla’s revenue rose 97% YoY. Since then, the revenue growth rate has been falling in every quarter. In 2Q15, Tesla’s revenue rose 24% YoY. This was the slowest growth rate in the previous six quarters.

Supplier issues

According to Tesla, the company is facing issues with some of its suppliers. Elon Musk said during the company’s 1Q15 earnings conference call that “there are several thousand unique parts in a car and if even one of those parts is not available for any reason, then you cannot ship, you cannot scale production.”

As Tesla joins the league of mainstream automakers, it has to live with these issues. However, there doesn’t seem to be any concerns about the demand, at least for now. According to Business Insider, citing Elon Musk, there’s a 25,000 order backlog for the Model-X.

Tesla’s revenue growth rates still look robust compared to legacy automakers like Ford (F), General Motors (GM), and Volkswagen (VLKAY). However, the markets have a different set of expectations for Tesla given the company’s size and target market. During the company’s 2Q15 earnings conference call, Elson Musk said that Tesla should be selling “about half a million cars in 2020, and maybe being able to exceed that.”

This would require a CAGR (compound annual growth rate) of more than 58% over Tesla’s projected 2015 shipments. Tesla might even face an uphill task in meeting its 2015 shipment guidance.

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