NEW YORK: Tesla is showing some promising signs that it will make money as advertised in the third quarter, but Wall Street isn’t buying it.
The electric car and solar panel maker delivered more than 80,000 vehicles from July through September, and CEO Elon Musk told employees late in the quarter that it was close to profitability.
Still, of 15 analysts who follow the company, not one expects Tesla to make money. As a group, they expect a net loss of $173.8 million, or 95 cents per share.
“We’d be really very surprised if they posted a profit for the third quarter,” said Garrett Nelson, an analyst for CFRA Research. “This is a company that lost over $3 per share each of the last two quarters. To go from that to all-of-a-sudden profitable would take a dramatic improvement.”
There also were warning signs from the company about reduced profit margins in China due to import tariffs charged by that country in response to US tariffs, Nelson said.
Tesla has achieved profitability before, but only in two quarters since becoming a public company in 2010. It has never posted a full-year profit and it lost $717 million in the second quarter and burned through more than $739 million in cash.
In a cheerleading email to employees as the third quarter closed in September, Musk wrote that Tesla was close to “proving the naysayers wrong.” The company, he wrote, must execute well on Sept. 30, the quarter’s final day. “If we go all out tomorrow, we will achieve an epic victory beyond all expectations. Go Tesla!” wrote Musk, who has been pledging profitability since early May.
Musk and Tesla have defied the odds before by successfully upending how electric cars are designed, produced and sold. Last quarter, Tesla nearly doubled production of its crucial Model 3 sedan just as Musk had promised, hitting 53,000. The Palo Alto, California, company delivered more than 83,000 vehicles in the quarter, over 80 percent of what it delivered in all of last year. There also were reports, however, that it was having trouble delivering Model 3s after producing them.
The company has also been plagued with one controversy after another, much of it self-inflicted as a result of Musk’s erratic behavior. During the last quarter, he ran afoul of the Securities and Exchange Commission, which filed a lawsuit alleging that he misled investors by falsely declaring on Twitter that he had lined up financing to take Tesla private. The SEC wanted to oust Musk as CEO as punishment, but in a settlement, Musk agreed to step down as chairman for three years. Musk and Tesla will each pay $20 million to resolve the case, and he also must have someone monitor his company-related tweets.
Now all eyes are back on Tesla’s financial performance. Nelson said posting a profit under national accounting standards hinges on how much money the company made per vehicle. He also said the accounting standards allow for Tesla to take some sales from the fourth quarter and put them on the books for the third quarter in order to realize more revenue. But that would make it profitability harder in the fourth quarter.
Tesla’s stock soared 12.7 percent on Tuesday to $294.14, largely because a longtime short-seller reversed course and said it would invest in Tesla for the long haul.
Citron Research, which had bet against Tesla stock for years, wrote in a note posted on its website that Tesla is destroying the competition. It produced charts showing that the mass-market Model 3 was the top-selling US luxury car during the first half of the year, more than doubling its closest competitor, the Mercedes C Class. Another chart showed Tesla’s Model S sedan atop the US large luxury car market with an estimated 8,000 sales.
Citron wrote that Tesla is not just pulling customers from luxury automakers but also taking sales from Toyota and Honda.
“As much as you can’t believe you are reading this, we can’t believe we are writing this,” Citron wrote.
Tesla has $1.3 billion in debt payments coming by early next year, raising concerns from analysts that it will have to borrow cash or issue more stock. It’s already $10 billion in debt.
But Citron wrote that a strong quarter could make another capital infusion unnecessary. “Tesla will be generating more than enough cash to fund both aggressive growth plans and build cash on the balance sheet,” the company wrote.
Wall Street skeptical of Tesla’s promise to post net profit
Wall Street skeptical of Tesla’s promise to post net profit
- The electric car and solar panel maker delivered more than 80,000 vehicles from July through September
- As a group, they expect a net loss of $173.8 million, or 95 cents per share
Lebanese social entrepreneur Omar Itani recognized by Schwab Foundation
- FabricAID co-founder among 21 global recipients recognized for social innovation
DAVOS: Lebanon’s Omar Itani is one of 21 recipients of the Social Entrepreneurs and Innovators of the Year Award by the Schwab Foundation for Social Entrepreneurship.
Itani is the co-founder of social enterprise FabricAID, which aims to “eradicate symptoms of poverty” by collecting and sanitizing secondhand clothing before placing items in stores in “extremely marginalized areas,” he told Arab News on the sidelines of the World Economic Forum in Davos, Switzerland.
With prices ranging from $0.25 to $4, the goal is for people to have a “dignified shopping experience” at affordable prices, he added.
FabricAID operates a network of clothing collection bins across key locations in Lebanon and Jordan, allowing people to donate pre-loved items. The garments are cleaned and sorted before being sold through the organization’s stores, while items that cannot be resold due to damage or heavy wear are repurposed for other uses, including corporate merchandise.
Since its launch, FabricAID has sold more than 1 million items, reached 200,000 beneficiaries and is preparing to expand into the Egyptian market.
Amid uncertainty in the Middle East, Itani advised young entrepreneurs to reframe challenges as opportunities.
“In Lebanon and the Arab world, we complain a lot,” he said. Understandably so, as “there are a lot of issues” in the region, resulting in people feeling frustrated and wanting to move away. But, he added, “a good portion of the challenges” facing the Middle East are “great economic and commercial opportunities.”
Over the past year, social innovators raised a combined $970 million in funding and secured a further $89 million in non-cash contributions, according to the Schwab Foundation’s recent report, “Built to Last: Social Innovation in Transition.”
This is particularly significant in an environment of geopolitical uncertainty and at a time when 82 percent report being affected by shrinking resources, triggering delays in program rollout (70 percent) and disruptions to scaling plans (72 percent).
Francois Bonnici, director of the Schwab Foundation for Social Entrepreneurship and a member of the World Economic Forum’s Executive Committee, said: “The next decade must move the models of social innovation decisively from the margins to the mainstream, transforming not only markets but mindsets.”
Award recipients take part in a structured three-year engagement with the Schwab Foundation, after which they join its global network as lifelong members. The program connects social entrepreneurs with international peers, collaborative initiatives, and capacity-building support aimed at strengthening and scaling their work.
