Electric carmaker Tesla Motors (TSLA - Free Report) is scheduled to report second-quarter 2018 results on Aug 1 after market close. Let’s take a closer look at its fundamentals ahead of its earnings release.
Tesla has been witnessing a downside in the past three months, having shed 3.2% and underperforming the industry’s decline of 1.1%. The weak trend might continue as Tesla has less chances of beating estimates this quarter and has seen negative earnings revisions ahead of its Q2 report (see: all the Alternative Energy ETFs here).
Tesla has a Zacks Rank #3 (Hold) and has an Earnings ESP of -1.51%. According to our surprise prediction methodology, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 and a positive Earnings ESP is likely to beat earnings estimates. A Zacks Rank #4 or 5 (Sell rated) is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The company saw negative earnings estimate revision from a loss of $2.68 to a loss of $2.70 for the yet-to-be-reported quarter over the past 30 days. Analysts lowering estimates right before earnings — with the most up-to-date information possible — is a not a good indicator. The Zacks Consensus Estimate for the second quarter reflects substantial earnings decline of 103.01% from the year-ago quarter (read: Auto Earnings Downbeat: Time to Buy the ETF on Dip?).
Additionally, analysts are increasingly becoming pessimistic on shares of Tesla ahead of its results. Over the past few weeks, analysts have not only lowered their revenue estimates and widened loss estimates for the to-be-reported quarter but have also reduced their price targets. According to analysts polled by Zacks, Tesla currently has an average target price of $306.29 with 35% of the analysts having a Strong Buy or a Buy rating and 31% of the analysts having a Strong Sell or Sell rating ahead of its earnings. All these suggest more pain ahead.
However, the earnings track record is good for the company with an average earnings surprise of 4.39% for the last four quarters.
Strong Q2 Production
Earlier this month, Tesla reported better-than-expected vehicle sales growth for the second quarter, which turned out to be the most productive quarter in the company's history. The automaker produced 53,339 vehicles during Q2, up 55% from Q1. It produced almost three times Model 3 cars (28,578) than in Q1 that exceeded combined Model S and X production (24,761). Tesla expects to increase production to 6,000 Model 3s per week by late next month (read: ETFs & Stocks to Buy on Auto Industry's Resilient 1H).
Overall, Tesla delivered 18,440 Model 3s, 10,930 Model S vehicles, and 11,370 Model Xs for a total of 40,740 vehicles.
What to Watch?
As Tesla ramped up production of Model 3, investors will closely watch its impact on sales growth and the cash position of the company. Cash and equivalents dropped 20% from the fourth quarter of 2017 to roughly $2.7 billion at the end of the first quarter. Additionally, investors are concerned whether this car would help steer the company to profitability.
ETFs to Watch
Given this, ETFs having the highest allocation to this luxury carmaker will be in focus going into its earnings announcement. These funds would be the potential movers if Tesla surprises the market.
VanEck Vectors Global Alternative Energy ETF (GEX - Free Report) — The fund shed 2.9% in the year-to-date time frame. Tesla occupies the top position accounting for 11.3% share.
ARK Industrial Innovation ETF (ARKQ - Free Report) — The fund has delivered returns of 5% since the start of the year. Tesla takes the top spot with 10.4% allocation.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) — It has lost 3% and has a Zacks ETF Rank #4 (Sell) with a High risk outlook. Here, Tesla takes the top spot with 8.3% share (read: 4 ETFs to Join The Sustainable Investing Trend).
ARK Innovation ETF (ARKK - Free Report) — This ETF has gained 17.6% since the start of the year. Tesla is the top firm with 7.9% allocation.
ARK Web x.0 ETF (ARKW - Free Report) - The fund is up 19.2% since the start of the year. Tesla takes the top spot with 5.9% allocation.
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