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Tesla misses first-quarter expectations, reaffirms delivery guidance

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Tesla (TSLA) reported its first loss on an adjusted basis since the second quarter of 2018.

The Palo Alto, California-based company posted an adjusted loss per share of $2.90 for its fiscal first quarter. This was wider than the $1.30 loss per share consensus analysts were expecting, according to Bloomberg-compiled data. In the same quarter last year, Tesla lost an adjusted $3.35 per share.

Ahead of Wednesday’s report, expectations for Tesla’s bottom-line performance ran the gamut, with consensus analysts polled by FactSet expecting an adjusted loss of $1.15 per share, and Estimize data pointing to a narrower 78 cent loss per share.

Tesla’s first-quarter revenue of $4.54 billion missed average expectations for sales of $4.84 billion, according to Bloomberg data.

Shares of Tesla opened lower by about 2% to $253.33 as of market open Thursday.

Investors were closely watching Tesla’s cash position after the company repaid a $920 million convertible bond in cash during the first quarter. Tesla ended the period with $2.2 billion in cash and cash equivalents, a $1.5 billion reduction versus the end of 2018, due to the repayment and a larger number of vehicles in transit to customer at the end of the period.

Operating cash outflow, less capital expenditures, was $919.5 million in the first quarter, reversing a positive $910 million operating cash flow in the fourth quarter of 2018. Tesla said in its letter to shareholders, however, that it expects operating cash flow less capex to be positive in “every quarter including Q2.”

“As the impact of higher deliveries and cost reduction take full effect, we expect to return to profitability in Q3 and significantly reduce our loss in Q2,” the letter read.

Wall Street was widely bracing for a rocky quarterly earnings report after Tesla reported a drop in vehicle deliveries on a quarter-over-quarter basis earlier this month. Deliveries for the period totaled approximately 63,000, down 31% from the fourth quarter, the company reported at the beginning of April. Tesla’s closely watched Model 3 deliveries fell to 50,900, fewer than in each of the two quarters prior. Combined deliveries for Tesla’s higher-margin Model S and X models also declined from the previous quarter to 12,100.

The company said it struggled to efficiently get cars to customers in Europe and China in the first quarter, contributing in part to the shortfall as more than 10,000 deliveries still in-transit shifted to the second quarter.

Tesla on Wednesday reiterated its previously issued guidance to see between 360,000 and 400,000 total vehicle deliveries in 2019, which would mark an increase of between 45% to 65% compared to 2018. In the second quarter, Tesla expects to deliver between 90,000 and 100,000 vehicles.

For April, Tesla “is tracking for the largest amount of deliveries in the history of the company,” CFO Zach Kirkhorn said during a call with investors after the release of the earnings report.

Since the start of the year, Tesla investors have been whipsawed by company announcements – and subsequent reversals – on a series of major strategic directives. Tesla in late February announced it was closing the vast majority of its physical locations and shifting sales online-only as it brought its base Model 3 vehicle price down to the company’s long-promised $35,000.

Less than two weeks later, Tesla announced it would instead keep more physical locations open than previous anticipated, and raised prices on most vehicles by an average of 3% in order to support the physical locations.

Shares of Tesla were down 22% for the year-to-date through Wednesday’s close, versus a gain of 17% in the S&P 500.

Fully autonomous ambitions

Tesla’s latest quarterly earnings results come on the heels of Tesla’s “Autonomy Day” on Monday, during which CEO Elon Musk asserted that the company will have 1 million vehicles on the road capable of driving without human assistance by mid-next year. Musk also said customers would be able to bring their cars to be part of a shared network of robo-taxis, competing with the likes of ride-hailing giants including Uber and Lyft.

Many investors were skittish after the event, which included sweeping claims from management about designing “the best chip in the world” in order to support Tesla’s self-driving ambitions. Nvidia (NVDA) was a previous chip supplier to Tesla, and refuted some of Tesla’s assertions about the superiority of its new hardware in multiple reports.

FILE- In this March 14, 2019, file photo Tesla CEO Elon Musk speaks before unveiling the Model Y at Tesla's design studio in Hawthorne, Calif. Musk appears poised to transform the company’s electric cars into driverless vehicles in a risky bid to realize a bold vision that he has been floating for years. The technology required to make that quantum leap is scheduled to be shown off to Tesla investors Monday, April 22, 2019, at the company’s Palo Alto, Calif., headquarters. (AP Photo/Jae C. Hong, File)
In this March 14, 2019 photo, Tesla CEO Elon Musk speaks before unveiling the Model Y at Tesla's design studio in Hawthorne, Calif. (AP Photo/Jae C. Hong, File)

“We see a significant amount of technology and execution risk in the shift in strategy from competing in just electrification to Tesla also beating Nvidia in hardware, Google in software, and building a better ride-hailing service than current ride-hailing leaders,” Jeffrey Osborne of Cowen, who rates Tesla shares as Underperform, wrote in a note Tuesday.

Google-parent company Alphabet (GOOG, GOOGL) is widely seen to be the current leader in the autonomous vehicle space, as its subsidiary Waymo announced the launch of a self-driving taxi service in parts of Arizona late last year.

The increased costs associated with building out full autonomy for Tesla concerned some investors – and was reflected in a 3.85% stock decline Monday – as Musk said investing in autonomy would comprise “basically [Tesla’s] entire expense structure.” Musk previously asserted in an October earnings call with analysts that the company would be cash flow positive in all quarters going forward, except for ones where a significant repayment was due, as was the case in the first quarter.

Musk added Monday during Autonomy Day that Tesla aims to be cash-flow neutral as it builds its fleet of self-driving vehicles, but expects the company will be “extremely cash-flow positive” once the robotaxi fleet is active.

The shift to focusing on building out a fully autonomous network also adds to a crowded docket of priorities for the company, which previously aimed more narrowly on bringing affordable electric vehicles to the masses. Tesla has previously stated goals including to bring Model 3 production rate to 5,000 by the end of the second quarter, build out its Gigafactory in Shanghai and launch a pickup truck.

During the call with investors Wednesday, Musk said the company is also creating a Tesla insurance product that will be “more compelling than what is currently out there” and hopes to launch it in about a month, offering few further details.

Updates with opening share prices Thursday.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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