Tesla sticks with Model 3 forecast as earnings top estimates

Tesla beat expectations in the first quarter and stuck with its forecast for Model 3 production, although the rapid buildup led the company to spend more cash than analysts had anticipated.

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The electric-car maker affirmed plans to hit a weekly production rate of 5,000 Model 3 sedans by the end of the second quarter as the company attempts to put factory delays in the rear-view mirror. Tesla also continues to forecast profits and positive cash flow in the third and fourth quarters.

But Tesla’s negative free cash flow hit $1 billion, much wider than the $277 million it burned during the fourth quarter. Tesla ended the quarter with a cash balance of $2.7 billion, down from $3.4 billion three months earlier. Analysts at Goldman Sachs expected the company to have $2.9 billion.

Tesla’s cash burn has fueled speculation that the company will need to raise capital sometime this year. CEO Elon Musk has said Tesla doesn’t need additional cash, but some analysts believe the company will change its mind to fund the Model 3 and new models, including the Semi big-rig truck and Model Y crossover. In a note to clients, CFRA analyst Efraim Levy said an attempt to raise capital during the first quarter of 2019 is likely despite Tesla’s efforts to curb spending.

Capital expenditures in 2018 will come in below $3 billion, Tesla said. It previously forecast spending of at least $3.4 billion.

On a conference call with analysts, Musk was asked if he wants to raise cash even if Tesla doesn’t need it. “No,” he said. “I specifically don’t want to.”

Musk also reiterated that Tesla went “too far” in automating its Fremont, California, assembly plant, an issue that Tesla has said contributed to Model 3 delays.

Shares swung between gains and losses in after-hours trading. Tesla was recently down 5.4% after Musk abruptly ended a round of questions from Wall Street analysts.

TickerSecurityLastChangeChange %
TSLATESLA INC.835.00+29.19+3.62%

Tesla recorded a loss of $710 million, or $4.19 a share. Excluding one-time items, Tesla lost $3.35 a share, a smaller loss than Wall Street’s estimate of $3.58.

Revenue grew by about 26% to $3.41 billion, beating forecasts for $3.22 billion.

Model 3 production hit a rate of 2,270 per week in April, while Tesla had aimed to build 2,500. Tesla made a total of 9,766 Model 3s during the quarter. It previously disclosed that total vehicle deliveries expanded by 20%, including the Model S and Model X.