Forget the Recent Delivery Beat: Here’s the Key Number That Will Decide Investors’ Reaction to Tesla’s Earnings
Tesla‘s (NASDAQ: TSLA) 486,532 vehicle deliveries in the third quarter exceeded Wall Street estimates, and the market responded positively. Still, the same thing happened with the big deliveries “beat” in the second quarter, only for second-quarter earnings to disappoint on the margin front. As such, the key metric to monitor in Tesla’s upcoming earnings report is its gross margin. Here are the factors working for and against it.
The cleanest number to follow is Tesla’s automotive gross margin excluding regulatory credits. The credits are variable and can’t be treated as a run-rate item. The first chart below shows the sequential decline from Q1 to Q2. It was a disappointing result and raised concerns that Tesla’s profit margins were in a structural decline, particularly concerning at a time when its free cash flow is negative.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.