Tesla's profit fails to please analysts

Tesla's profit fails to please analysts

Still, the fall in Tesla shares was less than that suggested by initial pricing after Wednesday's results and also far smaller than some of the swings in one of the past year's most volatile Wall Street stocks. "I'm optimistic about being profitable in Q1 and all quarters going forward", Musk said.

Overall it is the fourth quarter that Tesla is announcing a profit since the 2010 IPO.

The Model 3 has already achieved outstanding sales in the U.S., and is set to go on sale very soon also in Europe and China, and Australia in mid-2019. It expects to deliver between 360,000 to 400,000 vehicles in 2019, an increase of as much as 65 percent when compared with previous year.

To start, the Shanghai factory will build 3,000 Model 3s per week, while production at Tesla's Fremont plant will rise to 7,000 Model 3s per week by year's end, the company estimated. "The demand for Model 3 is insanely high". As we saw with the Model 3 unveiling, it could be some time for the truck to make it to production and into driveways.

Elon Musk, the company's CEO, said earlier this month that the company was targeting a small profit this quarter.

"We think people have been too bullish about Tesla showing earnings power, and sustained positive cash from operations", he said. Tesla recognizes revenue once a vehicle is delivered.

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The automaker reported free cash flow of $910 million noting, "We have sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019" in its earnings release.

"Even in a recession, worldwide demand is over 500,000", Musk said on a conference call. Tesla last disclosed in May that net Model 3 reservations - accounting for new orders and cancellations - exceeded 450,000.

The company said it made a net profit of $139.5 million in the three months ended December 31, compared with a $311.5 million profit in the third quarter, when it benefited from regulatory credits.

Production of the Model Y will most likely take place at Tesla's Gigafactory 1 in Nevada (where its batteries are made), allowing the EV maker to make the batteries and put them straight in the new EVs fresh off the production line.

"Tesla serves the goal of a "stalking horse" to the fast growing domestic Chinese EV industry, but we believe it has limited to zero terminal value in a region where a number of domestic champions should emerge", Morgan Stanley analysts said.

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