Will Tesla’s (TSLA) record sales result in profit? Analysts weigh in

Tesla (TSLA) is going to release its second quarter earnings results next week after announcing record delivery numbers earlier this month.

Now the market is trying to figure out if the record sales will translate into profit or if the aggressive ways Tesla used to achieve the record is going to hurt profitability.

Earlier this month, Tesla announced that it delivered 95,000 cars during the second quarter.

That was enough to beat Tesla’s previous delivery record by 4,000 cars.

It came at a time that Tesla shorts and naysayers were claiming that the automaker was having demand issues.

While the delivery numbers help dispel those demand issue rumors, now people are starting to look at the earnings, which Tesla is going to release on Wednesday, July 24.

Today, Needham analyst Rajvindra Gill released a note saying that the earnings will disappoint:

“To meet these aggressive targets, we anticipate further price cuts and aggressive leasing plans. Furthermore, we expect gross and net profit margins to remain ongoing issues for the automaker. We believe the automaker will continue to take steps to boost its deliveries at the expense of its bottom line.”

He doesn’t believe that Tesla is going to announce positive earnings next week.

Rajvindra Gill is ranked #242 out of 5,053 Analysts on TipRanks with a success rate of 56% and an average return of 11.8%. He has been maintaining a sell rating on Tesla’s stock over the last year:

Baird analyst Ben Kallo is telling a different story and reiterated an Outperform rating and $355.00 price target on Tesla (TSLA) this week.

Kallo thinks that the theory of deliveries affecting margins is overly negative:

“We continue to like the set-up for the balance of the year, despite the recent share move, as we believe further execution (beginning with the Q2 report) will help restore credibility and create a challenging short environment. Bear arguments have shifted to margins following the Q2 delivery release, though we think expectations have become overly negative and believe results could exceed estimates. Additionally, cash balance at the end of the quarter could be $4.5B+, which would be viewed favorably, in our opinion”

Ben Kallo is ranked #589 out of 5,053 Analysts on TipRanks with a success rate of 57% and an average return of 7.2%. He has been maintaining a buy rating on Tesla’s stock over the last year:

Electrek’s Take

I have to agree with Ben that the sentiment over the margins is indeed overly negative, but I don’t think it necessarily means Tesla will report a profit in Q2.

But either way, I think it will likely be very close — meaning a small profit or a small loss.

Delivering a small profit would go a long way in increasing confidence in the company, but it doesn’t mean much in the long-term.

I think there are much more important things coming up that will affect Tesla’s stock, like more details on the integration of Maxwell’s battery technology and Tesla’s own battery cell production.

That’s partly why I’m long TSLA.