Back to Earth: Tesla's losses grow on Model 3 delays
Tesla's lofty aims come as company burns through its cash at a fast rate
The day after Tesla and SpaceX CEO Elon Musk blasted his Tesla Roadster into space, his electric car company's mounting losses brought him back to Earth again.
Tesla Inc. posted a record quarterly net loss of $675 million US in the fourth quarter, up from a net loss of $121 US million in the same period a year ago. The Palo Alto, California-based automaker is struggling to meet production targets for its first mass-market car, the Model 3 sedan. It's also spending heavily on future vehicles, including a semi that's supposed to go into production next year.
Tesla lost $1.96 billion US for the full year, a record for the company and nearly three times its loss of $675 million US in 2016. Tesla has never made a full-year profit since it went public in 2010.
Tesla's adjusted fourth-quarter loss of $3.04 US per share was ahead of Wall Street's estimated loss of $3.15 US per share, according to analysts polled by FactSet. The adjusted loss eliminates one-time expenses, including stock-based compensation. Revenue for the quarter was $3.3 billion US, which was in line with analysts' forecasts.
Tesla's total revenue for 2017 was $11.8 billion US, which was also in line with analysts' forecasts.
Musk is a masterful marketer, and the red ink may not stem investors' excitement. The company's shares jumped three per cent to close at $345 US after SpaceX successfully launched its Falcon Heavy rocket on Tuesday with Musk's cherry red Roadster as its cargo. The convertible, with a dummy in a space suit at its wheel, is now heading toward an asteroid belt between Mars and Jupiter. Tesla's shares are also in the stratosphere, up eight per cent from the start of this year.
While Tesla's true believers love these stunts, some analysts are questioning whether Musk should be spending more time fixing Tesla's woes. Clement Thibault, a senior analyst with the website Investing.com, grumbled about Musk's recent fundraising efforts for The Boring Co., his new tunnel-drilling company.
"He appears to be more eager to sell hats and flamethrowers rather than meeting previously stated production targets for Tesla vehicles," Thibault wrote in a note to investors.
Here are some issues Tesla is facing:
Shifting targets: Tesla delivered 103,181 vehicles last year, up 35 per cent over 2016 and ahead of its targets. But it fell woefully short on the Model 3, which went into production in July. Tesla made just 2,425 Model 3s in the fourth quarter and has pushed back production targets multiple times. Musk said last month that Tesla wants to be making 10,000 Model 3s per month by the end of the first quarter and 20,000 per month by the end of the second quarter; the company reiterated that guidance Wednesday. It also said reservations for the car remain "stable" despite the delays, but it didn't give a total. At one point Tesla had more than 500,000 customers on a waiting list for the Model 3.
CEO pay: This will be Musk's first earnings call since last month's announcement of a proposed all-or-nothing pay package for him. The package requires Tesla, which is worth a little less than $60 billion US now, to grow in $50 billion USleaps to a staggering $650 billion US market capitalization over the next decade. If Tesla doesn't meet those goals, Musk won't get paid. If it does, the package could vault him into the ranks of the world's richest people. The proposal must still be approved by Tesla's shareholders, who are scheduled to vote in late March.
Cash burn: Tesla has lofty targets, including building a plant in China and launching a small SUV in 2020. It's also on the hook to build charging stations for its network of semi trucks. All that costs money, which Tesla is burning through at a fast clip. Tesla ended the fourth quarter with $3.4 billion US in cash; its capital expenditures were $3.4 billion US in 2017 and it said they will likely grow slightly this year as the company adds more stores, service centres and fast-charging Supercharger stations. Investors will want to know what Tesla is doing to stem that flow and whether the company will try to raise additional funds this year.