Tesla (TSLA) is set to report after the market closes on Wednesday, and analysts believe that the company will continue to burn through money, with a predicted net loss of $0.52 per share alongside revenue of $1.62 billion.
However, investors are unlikely to care too much about these EPS and revenue figures. Instead, Wall Street is likely to be focused on what management says on the earnings call, and will be interested in hearing more about autopilot, the SolarCity (SCTY) acquisition, and Tesla’s “master plan.”
Many analysts are still unconvinced about the SolarCity acquisition’s potential. On July 22, UBS commented, “We are cautious on the SCTY deal, as synergies seem limited.”
Oppenheimer goes so far as to include the SolarCity acquisition failing to close in its “upside” scenario for Tesla, in a July 20 note.
More recently, SolarCity announced that it believes it can get up to $150 million in “synergies” from the Tesla deal. UBS responded in a different note by saying it’s unsure about where the $150 million in synergies that the company is promising would come from. Given the intense skepticism so far, analysts are likely to be curious about the details of these synergies.
Noted Tesla bull (though he has become less bullish in recent months) Adam Jonas of Morgan Stanley believes that autopilot is an important concern for Musk to address. He believes that a crash back in May of a Tesla on autopilot is likely to “raise questions” about the manufacturer’s responsibility in these crashes and the benefits/downsides of autopilot in general. Musk will have to address these concerns as well as the National Highway Traffic Safety Administration investigation into the incident.
Of course, while EPS and revenue aren’t likely to get too much of a spotlight, the cash flow will. Musk’s plans will require tens of billions of dollars, and the company is currently losing hundreds of millions to billions every quarter, with a huge amount of debt as well. SolarCity is likely to add to both of these issues as well.
Thus, investors will be paying close attention for any indications of short- or medium-term capital raises, and analysts will have to model it into their estimates. Oppenheimer notes that ramping up Model 3 production might be able to fund Tesla’s capital needs, which is why this is another factor that Wall Street be keeping its eye on. However, Oppenheimer also believes that is unlikely that Tesla will be able to ramp up production fast enough, and Tesla is more likely to have to raise money from investors or creditors again.
Rayhanul Ibrahim is a writer for Yahoo Finance.