Tesla Inc.’s latest earnings call lacked the drama and hostility of the prior one, and that was exactly what investors wanted.
Chief Executive Elon Musk was more muted during the post-earnings call with analysts Wednesday, personally apologizing to the two he had lashed out back in May.
That behavior, plus a renewed promise of profitability in the second half of the year,[1] helped send Tesla TSLA, +9.49%[2] shares up as much as 11% in Thursday trading, putting them on track for their biggest one-day gain since November 2015.
The stock was on pace for its highest close since July 2, and was the best performer on the Nasdaq 100.
“The CEO worked to restore some faith and credibility with investors that he can be a plus to the investment narrative, not a minus,” wrote KeyBanc Capital Markets analyst Brad Erickson, who has the equivalent of a neutral rating on the stock. Musk delivered what Erickson called “maybe the most valuable apology of all time.”
Opinion: Elon Musk seems to have learned a few lessons, but the big one remains[3]
Analysts were pleased that Musk didn’t put on another show this quarter, but they remain divided on whether his financial targets seem realistic. Musk said on the call that Tesla will aim to be profitable and cash-flow positive from the third quarter onward.
Needham analyst Rajvindra Gill reiterated his bearish view on the company, writing of his projections for two free-cash-flow positive quarters to end the year and then free-cash burn in 2019. Gill doubts that the base Model 3 will be profitable unless the cost of Tesla’s battery packs decline sharply. He also worries that demand for Tesla’s base model might change as the $7,500 tax credit declines.
Among his lingering questions: “What’s the true level of demand for the $35,000 base model as we exit the year, how does demand change once the $7,500 credit declines, what percent of the 420,000 net reservations are for the $35,000 model and will cancellations accelerate?” Gill wrote that “contradictions persist” with Tesla’s latest report.
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Cash consumption is one of the main things Morgan Stanley analyst Adam Jonas is considering when looking at Tesla’s financials. For the latest quarter, he deemed the metric “better than expected,” though he still wonders whether the trend is sustainable and what Tesla had to do to reach this point. “Sustainability questions involve working capital arrangements with suppliers (that can snap back) and securitization actions,” he wrote.
Jonas rates the stock at the equivalent of neutral with a $291 price target.
Analysts at Goldman Sachs highlighted lingering...