Tesla earnings miss expectations, shares slip

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Following Elon Musk's recent warning of a "very difficult" time ahead for Tesla, the electric auto maker on Wednesday reported a much smaller profit for the fourth quarter than it saw during the previous three months.

Tesla Inc eked out a small quarterly profit on Wednesday and predicted it would be profitable in the first quarter, but acknowledged that the erosion of a federal tax credit in 2019 would cut into sales of its vehicles, disappointing investors.

After posting two consecutive quarterly profits for the first time since going public, Tesla now faces the challenge of maintaining profitability in the face of debt repayment obligations.

In the year-ago quarter, Tesla posted a loss of $3.04 per share on revenue of $3.29 billion. Revenues generated in Q4 amounted to $7.23 billion against average estimates of $7.08 billion.

Based on management's previous commentary, results for the fiscal first quarter could also come in soft.

Adjusted fourth-quarter earnings per share: $2.10.

Since reaching a record high of $387.46 last August, Tesla shares have fallen by 21%. Tesla's cash and cash equivalents also increased by $718 million from the third quarter to $3.7 billion.

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Again, the Model 3 prove to be Tesla's most significant driver.

"Batteries and powertrains will come out and go straight into the vehicle", Musk said, per Wired.

Tesla credited strong demand for its Model 3, manufacturing improvements and recent cost cuts for the turnaround.

Tesla shares sank the first trading session of 2019 after the company said it was cutting its prices across vehicles by $2,000 in the U.S. The move was meant to help absorb the reduction in the federal electric vehicle tax credit, which halved to $3,750 from $7,500 as of January 1. Both markets are considered important growth opportunities for the company. Throughout 2018, Tesla delivered a total of 145,846 Model 3, making it "the best-selling premium vehicle (including SUVs) in the United States for 2018", says Tesla and thinks this will continue.

In more concrete terms, Tesla is "expecting to deliver 360,000 to 400,000 vehicles" throughout 2019.

A new plant in China could boost the Model 3 production rate even higher. This projection is slightly behind schedule when compared to Musk's previous commentary in mid-2017, when he had asserted that investors should have "zero" doubt that Model 3 production would hit 10,000 per week in 2018.

"I expect the demand for the Model Y will be maybe 50% higher than the Model 3", Musk said, adding that he saw annual demand for the existing Model 3 at around 700,000 to 800,000 units a year, and maybe as low as 500,000 if a recession emerges.