By Spencer Feingold
Tesla reported a bigger-than-expected loss of $2.90 per share in its first quarter earnings released Wednesday evening after the markets closed — much later than expected.
The disappointing loss was far steeper than the expected drop of $0.69, which was predicted by analysts surveyed by Thomson Reuters.
Tesla ($TSLA) also reported $4.5 billion in revenue, down from the expected $5.18 billion.
“The challenge for investors is how do you get a company like this to be free cash flow positive and sustain that, and not have to constantly go back to the capital market,” David Nelson, the chief strategist at Belpointe Asset Management, told Cheddar.
The earning results come as Tesla confronts waning demand for its electric vehicles. Earlier this month, Tesla announced that its vehicle deliveries for Q1 were around 63,000, a drop of 31 percent from the quarter prior.
Tesla reaffirmed, however, its guidance of 360,000 to 400,000 total vehicle deliveries in 2019. But, the company's co-founder and CEO Elon Musk had earlier tweeted that Tesla will make over 500,000 cars in the next 12 months, which violated a deal Musk made with U.S. regulators after communicating inaccurate company information last year.
"In response to the operational challenges we experienced with international expansion in Q1, we are in the process of balancing our regional vehicle builds throughout the quarter. This provides an opportunity for additional cost efficiencies in our factory, supply chain, logistics operations and delivery centers," Musk and Zach Kirkhorn, the company's CFO, wrote in the earnings report.
The company also faces pressure from slashed tax credits — as of Jan. 1, Tesla's $7,500 federal tax credit was cut in half to $3,750. In turn, the company reduced the price of its models by around $2,000 to absorb some of the increased cost on consumers.
“This is a tricky arbitrage between short-termism and long-term investors,” Ross Gerber, the president and CEO of Gerber Kawasaki Wealth and Investment Management, told Cheddar. “Tesla has to balance its growth and manage that with its desire to be a sustainable, financial company.”
Tesla, which turned 16 years old this year, also told federal regulators last week that four board members will step down at the end of their terms.
Musk said Monday that Tesla is expanding its driverless technologies and plans to launch a robot taxi fleet by the end of next year.
“All Tesla cars being produced right now have everything necessary for full self-driving. All you need to do is improve the software,” Musk said at a presentation at the company’s Palo Alto headquarters.
The company joins several other major businesses, such as Lyft ($LYFT), Uber, and Waymo, in the sector of autonomous driving. But Gerber claimed that Tesla has a technological advantage over the competition.
“Tesla is way far ahead of everybody and I think the other guys try to pretend they are there but they’re not even close,” Gerber said, adding that Tesla's self-driving vehicles feel like a “F22 fighter plane.”
“It is just amazingly advanced,” he added.