Tesla’s Second Quarter Loss Expands. Balance Sheet, Future In Question
For the second quarter of this year, Tesla Motors lost $105.6 million, or $1 a share, that is up from $58.9 million, or 60 cents a year earlier. Tesla put the blame on the end of Roadster sales and the gap to full production of the Model S.
The adjusted loss of 89 cents a share, was narrower than the consensus estimate of a deficit of 94 cents, which compares to a adjusted loss of 53 cents a year earlier. Tesla also re-confirmed production cuts for the Model S in Q3 from 1,000 to 500, and estimates for Q3 revenue have been lowered by analysts by over 40 million.
The California based startup does boast customers in Toyota and Daimler AG, and continues to insist it will not only still produce (and sell) 5,000 Model S cars it had earlier projected by year’s end, but also easy blow past 20,000 units sold in 2013.
“This accelerating pace of reservations makes us confident that demand will surpass 20,000 Model S units for full-year 2013 deliveries,” said Elon Musk in a statement.
Reservations for the Model S in the quarter increased to 11,500, and to 12,200 shortly thereafter.
Curiously, the CEO on the company’s conference call stated that Tesla may consider raising equity at some point “to provide a cushion” and help fund vehicle development, but it won’t do so in the very immediate future.
Looking at the company’s balance sheet we believe that Elon Musk’s version of ‘not’ the very immediate future must be a really small amount of time, as the company continues to burn cash almost as fast as the shareholder equity fades.
Equity remaining for shareholders stood at 62 million, that is down 91.6 million for the quarter, and working capital is down around 25 million from over 100 million three months earlier. The money available in the bank is way to low for any kind of mass producer of automobiles to be successful, and with over 700 million in liabilities, this company needs an infusion of money in the worst way.
With next to no cars being produced for this quarter, and a question of how much money Tesla can actually make on the 4,500 cars they think they can build in the fourth quarter, their future is anything but certain, and their $3 billion market cap could easily be obliterated over the coming months. For this reason, we believe despite what Tesla says, the company will shortly be tapping its resources to convert cash onto its balance sheet in short order. It has to do it to ensure its future.
Past the central question if Tesla can be profitable at all selling the Model S (they lost hundreds of millions on the Roadster), how can Tesla be confident of selling 20,000 Model S pure electric vehicles next year, considering the entire industry combined won’t hit that level this year?
One thing is for sure, many uncertainties are still ahead. In light of Tesla’s leadership status in the EV industry, we hope the company can somehow pull through this tough time.
Tesla shares fell yesterday to a close of $28.95, down over $7 from 10 days earlier when it closed at $35.95.