Profit or not? Analysts divided ahead of African born Elon Musk’s Tesla second-quarter results

PUBLISHED: Tue, 21 Jul 2020 23:40:14 GMT

(Reuters) – When Tesla Inc (TSLA.O) reports second-quarter results after the bell on Wednesday, investors will be keen to see whether the electric carmaker has delivered a profit during the global pandemic that has sunk most of its internal combustion rivals deep in red ink.

Billionaire Elon Musk: I am not Warren Buffett’s biggest fan (Photo by Charley Gallay/Getty Images for E3/Entertainment Software Association)

Analysts’ estimates for Tesla’s second quarter range from an adjusted loss as steep as $2.53 a share to a $1.41 per share profit. On average, they expect an adjusted 11 cents loss per share and a net loss of $240 million, according to Refinitiv data. More bullish investors have sent Tesla’s shares soaring in recent weeks and made it the world’s most valuable automaker.

Tesla’s April-June results also have wider ramifications. A profit would mark the company’s first cumulative four-quarter net income, a goal it must accomplish to be added to the S&P 500 index, where it would be among the most valuable companies.

Some analysts have said that failing to reach that goal could send Tesla shares plummeting after they surged more than 275% so far this year.

Tesla Chief Executive Elon Musk, in the meantime, has poked fun at the company’s naysayers and those who placed bets against him with short positions in the stock, by launching a limited edition of red satin “short shorts.”

Earlier this month, Tesla surpassed expectations when it announced it had delivered more than 90,000 vehicles in the quarter, significantly beating analyst estimates and running counter to the wider auto industry trend.

But while vehicle deliveries increased 2.5% on a quarterly basis, production dropped nearly 20%, clouding the outlook for the company that had predicted it would deliver at least 500,000 vehicles by the end of the year, Investors have been closely following any revisions of that target.

Tesla’s U.S. vehicle factory was shut for some six weeks during the second quarter on local regulators’ orders. The company has ramped up production at its new Shanghai factory and sold more than 29,600 vehicles in China during the second quarter.

But as global unemployment remains high and the economic outlook uncertain, many consumers are expected to hold off on larger purchases, including vehicles.

Nord LB analyst Frank Schwope expects global auto production and sales to collapse by 15% to 25% worldwide in 2020, but said Tesla might be more insulated as its buyers remain committed.

Sign Up for Our Newsletter Daily Update
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.