High Expectations for Tesla

0

Tesla’s quarterly report could be another wild ride for investors.

The electric carmaker’s stock has more than doubled since Tesla’s previous quarterly report on October 23, when it posted a surprise profit that was viewed as a milestone for the company.

Still, a Reuters analysis of Tesla’s and other luxury carmakers’ operating profit per vehicle – a metric closely watched by auto executives – shows Tesla still has a long way to go before reaching the steady profits of rivals Porsche, BMW and Mercedes-Benz.

At an average of roughly $17,750 per vehicle, operating profit at luxury carmaker Porsche, for example, has been stable over the past four years. Mercedes’ and BMW’s profit per vehicle have been closer to $3,000.

At Tesla, on the other hand, operating results fluctuated between a loss of nearly $20,500 per vehicle in the third quarter of 2017 and a profit of nearly $5,000 per vehicle in the third quarter of 2018.

Calculating profits per vehicle allows for better comparison across the auto industry. Reuters selected Porsche, BMW and Mercedes because their cars compete in similar price segments and for a like-minded customer base.

Tesla’s rally in recent months has been fueled by its unexpected third-quarter profit, a production ramp-up at its new factory in China and better-than-expected car deliveries. Tesla’s stock was up 1% on Tuesday.

While analysts on average expect Tesla to report another profitable quarter, it would be only the fifth such quarter since 2010. For the December quarter, analysts on average expect Tesla to post revenue down 2.9 per cent to $7.02 billion and adjusted net income of $305 million, or $1.72 per share. Options traders expect more volatility after Tesla releases its fourth-quarter results late on Wednesday.

As of Tuesday, Tesla options implied an 11 per cent swing for the shares in either direction by Friday. Over the last eight quarters, the stock moved 9.5 per cent on average after Tesla reported results, according to options analytics company Trade Alert.