Tesla missed big time on earnings, but the company's core business is in good shape

Tesla missed big time on earnings, but the company's core business is in good shape

Tesla Model S


The Model S.

  • Tesla posted its largest-ever quarterly loss.
  • But the carmaker is on track to max-out deliveries on its most expensive vehicles.
  • If it can sustain demand for the Model S and Model X, it will have a reliable revenue stream.

Tesla reported third-quarter earnings on Wednesday, and they were a miss.

More than a miss, they were also the largest quarterly loss in the carmaker's history as a public company.

The stock got clobbered after hours, down over 4% to $307 after declining 3% during the trading day.

Tesla is spending a lot of money in 2017 to deal with the challenging launch of its Model 3, a launch that now looks ever more challenged as the company doesn't expect to be building 5,000 vehicles per week until late in the first quarter of 2018, three months past what Tesla predicted when the first Model 3s were delivered in July.


That's a significant amount of bad news for investors to digest, but there's some good news (although even it is affected by the bad).

"Based on the recent acceleration in order growth, we now expect that Model S and Model X are on pace for about 100,000 deliveries in 2017, an increase of 30% compared to 2016," Tesla said in a letter to investors.

The Models S and X are Tesla's current bread-and-butter vehicles and what we could call the "core" of its business. That 100,000 number is a milestone, as Tesla's production system at is California factory likely isn't designed to build much more. And, of course, Tesla sells both cars for around $100,000 on average.

Tesla has done so well with these vehicles - effectively monopolizing the global market for luxury electric cars - that it can afford to trim production by 10% to get the Model 3 on track. And if it can sustain demands for the S and X, it will have a reliable yearly revenue stream.

If there's a positive in an otherwise dismal earnings report from the company, this is it.


Get the latest Tesla stock price here.