Why Analysts Expect Tesla’s Profit to Decline Further in Q1 2019



Tesla’s Q4 2018 earnings

As discussed in the previous parts of this series, Tesla’s (TSLA) fourth-quarter results impressed investors, but the departure of its CFO, Deepak Ahuja, drove pessimism. In the coming few quarters, the company’s ability to maintain high volume production and improve its gross margin could be crucial. Now, let’s take a quick look at Wall Street analysts’ estimates for the company’s first quarter of 2019 and find out what they could mean for investors.

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Analysts’ estimates for Q1 2019

As of January 31, Wall Street analysts’ estimates compiled by Reuters suggested that Tesla’s adjusted EPS could be $1.04 in the first quarter this year, worse than $1.93 in the fourth quarter of 2018. Previously in the first quarter of 2018, the company reported an adjusted loss of $3.35 per share.

According to analysts’ estimates, Tesla’s revenue is likely to drop by about 7.2% and 2.4% YoY in the first quarter and second quarter, respectively. Similarly, analysts expect the company’s consolidated gross margin to be in the range of 19.7% to 20.9% in the next couple of quarters.

Moreover, in 2018, TSLA improved its weaker production rate significantly as compared to 2017 due to improvements in the Model 3 production rate. Now, the company needs to focus more on improving its gross margin from its vehicle lineup. While Wall Street analysts’ revenue estimates for the next couple of quarters reflect pessimism, investors (XLY) might remain hopeful, as the company’s significantly higher production in the first half of 2019 could boost its revenues.

Q4 2018 earnings season

Tesla’s Chinese (MCHI) competitor, NIO (NIO), is expected to announce its fourth-quarter results in the next couple of weeks. In the last quarter, NIO managed to beat its vehicle delivery guidance. The company gave guidance of 6,700 to 7,000 units and delivered 7,980 cars in the fourth quarter.


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