With earnings due after the bell, Tesla Motors (NASDAQ:TSLA) is under a lot of pressure to outperform to the degree that warrants its astronomical market cap valuation. To make matters more difficult, it will have to do so without the sales of California’s zero-emissions credits, which critics point to as artificially inflating Tesla’s profits and cash-flows while the underlying business bumbles along.
Tesla is expected to report earnings of 7 cents a share, excluding some items, based on the average of 10 analysts’ estimates compiled by Bloomberg. In the same period a year ago, Tesla brought in 12 cents a share on the same basis, its first ever profit, but led by a surge in California zero-emission vehicle credit sales and savings from the early repayment of a federal loan, Bloomberg said. This time around, analysts are projecting a loss on a GAAP basis.
Slower vehicle deliveries — due to Tesla’s need to set vehicles aside for other regions — and a further contraction in California’s credits program will put strain on the company’s report later on Wednesday, though Tesla has historically had a knack for pulling a surprise at the last minute. Still, there are concerns swirling about that are not under Tesla’s direct control.
“Constraints in supplies from Panasonic and 1,000 cars on the water headed for China” will keep the automaker from setting another record, Craig Irwin, an analyst with Wedbush Securities, told Bloomberg. He has the stock rated at Outperform. That could pose a headwind to Tesla’s plan of increasing Model S production by 56 percent this year, and analysts and investors will be looking closely at Wednesday’s report in order to glean any possible indication of progress towards that goal.