Can Tesla Start Turning a Profit?

Tesla reported another loss in the second quarter, but CEO Elon Musk is upbeat that the firm will be profitable going forward.

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Tesla Inc
(TSLA)

We calculate adjusted free cash flow of negative $706.5 million compared with negative $942 million in the first quarter and negative $1 billion in the second quarter of 2017. This burn could have been worse because Tesla likely incurred large production costs at the end of the quarter to meet the Model 3 production target of 5,000/week yet most of these vehicles were likely not booked in revenue until the third quarter after delivery to the customer. The company finished the quarter with $2.2 billion of cash and management lowered its 2018 capital expenditure projection to slightly below $2.5 billion from slightly below $3 billion. Total vehicle deliveries in the second quarter rose 85% year over year and by 36% sequentially to 40,768.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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