Tesla, Inc. Earnings: What to Watch

When electric-car and energy storage company Tesla (NASDAQ: TSLA) reports its second-quarter results Wednesday afternoon, you can bet investors and the media will be watching closely. The company's combination of sharp sales growth and widening losses has polarized many investors, and CEO Elon Musk's outbursts on Twitter against his detractors recently has only heightened scrutiny.

Ahead of the earnings release, here's an overview of some of the areas investors may want to pay the closest attention to.

Tesla Model X interior with Autopilot activated

Tesla Model X. Image source: Tesla.

Top- and bottom-line results

Since Tesla already reported its second-quarter vehicle deliveries, it's already clear that the company's revenue for the period will be up significantly compared to the year-ago quarter. Driven by fast-growing Model 3 production and deliveries, Tesla's top line will likely surge to around $4 billion -- up from $2.8 billion in the year-ago quarter.

When it comes to profitability, however, the outlook is bleak. The ongoing Model 3 production ramp-up will likely weigh heavily on profitability as fixed costs for the high-volume Model 3 production line are spread across fewer cars than the line is meant for. Tesla has said it won't be until Model 3 production stabilizes at 5,000 units per week that the company will be able to begin generating positive cash flow from Model 3 -- and Tesla didn't hit this production level until the last week of the quarter.

Investors should hope for at least a slight improvement in non-GAAP loss per share compared to its first-quarter non-GAAP loss per share of $3.35. A worse loss than what Tesla saw last quarter could be a red flag, as it would imply that it may be having trouble improving its economics as Model 3 production increases.

Cash balance

Tesla's intense cash burn recently has highlighted the company's cash position.

Its cash balance fell from $3.4 billion in the fourth quarter of 2017 to $2.7 billion by the end of Q1. Given that management said in its first-quarter update that it expected capital expenditures for the remainder of the year to amount to about $2.3 billion, it's easy to see why its shrinking cash position is concerning -- and it's expected to dwindle further in Q2. The question is: How much worse will it get?

A woman unlocks her Model 3 with a Tesla app on her smartphone

Model 3. Image source: Tesla.

Model 3 production rate

After falling about six months behind its initial Model 3 production targets, Tesla importantly achieved its revised target production rate of 5,000 Model 3s per week by the end of its second quarter. But now investors will want to see whether this rate has proven to be sustainable during the beginning of Q3. In addition, it expects to achieve a Model 3 production rate of 6,000 units per week by late August. Is Tesla still on track for this target?

Bottom-line guidance

Last, Tesla is aiming to be cash flow positive and profitable on both a GAAP and non-GAAP basis in both Q3 and Q4 -- a target analysts disagree with. On average, analysts currently expect a third-quarter non-GAAP loss per share of $1.05. Will Tesla stick to its guidance? Or will analysts' consensus forecast prove to be a more accurate representation of Tesla's financial situation?

Tesla reports its financial results after market close on Wednesday at 2:30 p.m. PDT.

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla and Twitter. The Motley Fool has a disclosure policy.

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