Tesla reported a larger loss per share than expected in the second quarter, but there was more revenue and less of a cash burn than expected — all of which resulted in an after-hours surge in share prices that at one point amounted to more than 10 percent.
There were less quantifiable factors as well, in the form of apologies from Tesla CEO Elon Musk for his behavior three months earlier.
Musk had dressed down Toni Sacconaghi, an analyst for the Sanford C. Bernstein investment management firm, during the previous quarter’s conference call for asking what the billionaire techie called “boring, bonehead questions.” He also had complained about a “dry” question from RBC Capital Markets’ Joseph Spak.
During today’s call, Musk apologized to both analysts.
“I’d like to apologize for being impolite on the prior call. Obviously I think there’s no excuse for that. … There are reasons for it, I got no sleep, been working 110-hour, 120-hour weeks,” Musk told Sacconaghi.
Sacconaghi and Spak accepted Musk’s apologies.
Just as the flare-up contributed to a smackdown in Tesla’s stock in May, Musk’s contrite tone this time around contributed to today’s real-time rise in prices. But the more fundamental factors had to do with Tesla’s vehicle production rates and the prospects for future profits.
Net loss attributable to common shareholders for the April-June quarter amounted to $717.5 million, or $4.22 per share, which was more than some analysts expected. But the company burned through only about $430 million of its cash on hand, leaving it with $2.8 billion in its reserves.
That’s less of a burn than analysts expected, and it means Tesla is under less pressure to seek more financing.
“We certainly could raise money, but I do not think we need to,” Musk said. He added that Tesla’s expansion plans in China would be financed by “essentially a loan from local banks in China.”
The revenue side of the report was more positive than expected: $4 billion for the quarter, as opposed to Thomson Reuters’ forecast of $3.92 billion. Musk repeated his view that profitability is just around the corner, thanks to a ramp-up in production of Tesla’s Model 3 electric car. Tesla said its gross margin on Model 3 cars turned “slightly positive” during the quarter, meaning the company was no longer losing money on every Model 3 it shipped.
“We believe we can be sustainably profitable from Q3 onwards. … Our goal is to be profitable and cash-flow positive,” he said.
Musk added a caveat, however: “There may be occasional quarters where we pay back a big loan or something.”
Tesla said its weekly production rate reached the 5,000 mark for the Model 3, plus a combined 2,000 for the Model S high-end sedan and the Model X SUV, for “multiple” weeks in July. Going forward, Musk said he expected that rate to become the average for the third quarter, compared with a weekly average of about 2,000 cars for last year’s corresponding quarter.
“It’s really kind of a mindblowing leap forward for a manufacturing company,” Musk said. The quarterly totals were 53,339 vehicles produced, 18,449 Model 3 cars delivered, and 22,319 Model S and X deliveries.
Sustainability and profitability will be key yardsticks in the quarter ahead. In the course of the past quarter, Tesla set up a fourth auto production line in a tent-style structure at its car factory in Fremont, Calif., and CNBC reported that Tesla workers were brought in from out of state for a quarter-ending push to build batteries and cars.
Longer-range, Musk is counting on Tesla Gigafactories in Europe and China to boost profits.
While Musk took questions and issued apologies, Tesla’s share price rose as high as $331.95. That was more than 11 percent above the closing price for the trading day, but still below the $370 peak that was recorded in June.
