Tesla posts narrowed Q4 loss, Model 3 production on track

Despite reporting narrowed losses in the fiscal 2016 fourth-quarter, compared to the similar period of fiscal 2015, the stock of electric car marker Tesla Inc. (NASDAQ: TSLA) has lost $20.82 in the past one week to close at $257 on last Friday. Lower than anticipated earnings per share gave an opportunity for the short-sellers to push the stock downwards. However, considering the progress made in the delivery of the Model 3 sedan, we anticipate the stock to resume its uptrend in the days ahead.

The Palo Alto, California-based company reported fiscal 2016 fourth-quarter revenue of $2.284 billion, up 88% from $1.214 billion in the similar period last year. The Q4-2016 GAAP net loss narrowed 62% to $121.34 million or $0.78 per share, from a GAAP net loss of $320.40 million or $2.44 per share in Q4-2015.

Excluding items, the fourth-quarter non-GAAP net loss of $106.55 million or $0.69 per share was lower than the non-GAAP net loss of $264.79 million or $2.02 per share in the fourth-quarter last year. The Wall Street analysts anticipated Tesla to post a loss of $0.43 per share on revenues of $2.18 billion.

Tesla

At the end of the December quarter, Tesla’s cash and cash equivalents stood at $3.39 billion, an increase of 183% on a y-o-y basis. The company stated that the gross margins improved to 19.1%, from 18% a year ago.

Orders for Model S and X put together increased 49% y-o-y in the fourth-quarter. Tesla also confirmed that it is on track to begin production of the much awaited Model 3 in July. Tesla also confirmed that the battery production has started at Gigafactory 1. Going forward, the company anticipates delivering 47,000 to 50,000 Model S and Model X combined in the first-half of 2017. This translates to a 61% to 71% increase in deliveries, compared with the first half of last year. Tesla also expects gross margin to increase in the second half of 2017. Thus, considering the optimistic FY17 view of the management, we expect the stock to bounce back.

The stock currently trades near the support level of 251. The force index is near the three month low. So, we can expect buying support to come in.

To gain from the expected rise in the share price, a binary trader can purchase a call option contract with expiry date near March 7th . An entry into the trade is advisable only if the stock trades below $253 in the cash market.

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