Tesla Motors, Inc.'s Model 3 Is on Track, but Loss Widens

By Markets Fool.com

Model X. Image source: Tesla Motors.

Continue Reading Below

Electric-car maker Tesla Motors' (NASDAQ: TSLA) second-quarter financial results were worse than analysts were expecting. But investors don't seem to care too much. Shares were trading about flat in after-hours trading at the time of this writing. As Tesla doubles down on future-focused investments such as its Gigafactory and Model 3, the company's big bets on growth continue to capture investor attention.

Here's a review of the quarter's financial results, along with a look at some key points from the shareholder letter.

Quarterly results

Tesla reported a loss of $293 million, or $2.09 per share. On a non-GAAP basis, this loss was $150 million, or $1.06 per share. This non-GAAP loss per share was wider than its $0.57 loss in the prior quarter and its $0.48 loss in the year-ago quarter.

Tesla's revenue was about $1.3 billion. Revenue adjusted to include a $293 million net increase in deferred revenue from indirect leases for its vehicles, as well as from vehicles sold with the company's residual value guarantee, was about $1.6 billion. This compares with adjusted revenue of $1.6 billion in the prior quarter and $1.2 billion in the year-ago quarter.

Continue Reading Below

On average, analysts were expecting Tesla to report non-GAAP EPS of $0.52 and adjusted revenue of $1.63 billion.

Tesla delivered about 14,400 vehicles during the quarter -- a figure it had already reported a few days after the quarter's end. Deliveries were shy of the company's expectations for 17,000 deliveries as Model X production was slowed by supplier shortages. Model X accounted for about 4,600 of these deliveries -- up from 2,400 in the prior quarter.

Key takeaways

Model 3 is on track. Tesla said it has completed the Model 3 design phase and remains on schedule to launch the $35,000 vehicle next year. For the Model 3 program, which Tesla expects to generate $20 billion annually, Tesla has moved on to tooling, production planning, and validation.

"Some Model 3 production equipment is already on line, including initial capacity in our stamping and paint centers," Tesla explained in the company's second-quarter shareholder letter. "Later this year, we plan to begin construction of new Model 3 body and general assembly centers."

Gigafactory on target to reach 35 GWh cell production in 2018. The company's construction of its Gigafacotry, or a battery factory aimed at producing more battery cells than was produced in the entire world in 2013, remains on track with the company's recent accelerated plan to reach a production rate of 35 GWh per year by 2018, or two y ears earlier than initially planned. The Gigafactory pull-ahead was announced not long after Tesla witnessed higher-than-expected demand for the Model 3 when it was unveiled earlier this year.

Tesla Gigafactory with Model 3 outside. Image source: The Motley Fool.

Tesla reduced its full-year outlook for deliveries. After missing its target for quarterly vehicle deliveries for both Q1 and Q2, the company reduced its outlook for full-year guidance for the metric. Tesla said it expects to deliver 50,000 vehicles during the second half of the year. That would put full-year deliveries at about 79,200 -- short of its initial guidance for 80,000 to 90,000 vehicles in 2016.

Notably, however, 50,000 deliveries in the second half would be a significant jump from Tesla's 29,200 deliveries in the first half. And Tesla insisted that demand for its vehicles supports this level of deliveries:

At the beginning of Q2, we had very few Model X test drive cars in our stores and no refreshed Model S vehicles. Despite not having the refreshed Model S in stores for the full quarter, and not until June for international markets, Model S orders increased year over year. With the addition of Model X orders, total Q2 net new vehicle orders rose 67% from a year ago.

Overall, the quarter's results once again highlight just how focused the company is on growth. Near-term losses mounted as Tesla made significant inroads on plans for growing vehicle sales from 50,000 deliveries during 2015 to its target of 2018 deliveries during 2018.

Stay tuned to The Motley Fool for a closer look at Tesla's earnings.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.