Tesla’s stock tanked in after-hours trading following missed income and profits targets in its latest earnings report, but investors would be wise to look ahead as bullish signs continue to mount for the electric car maker.
In Wednesday evening’s earnings report, Tesla stated that it lost $408 million during the three months ending in June. The loss was far worse than Wall Street had anticipated. Tesla stock fell by as much as 12 percent in after-hours trading last night, which stands to wipe out as much as $5 billion from the company’s market cap when markets open.
Craig Erlam, senior market expert at Oanda explained, “It’s another disappointing earnings report from Tesla as it continues to work towards becoming consistently profitable and being able to deliver the number of cars demanded by buyers and investors,” adding, “The company has never lacked ambition, rather the ability to deliver on it.”
Regardless of Tesla’s profits miss, the company met its commitment to bolster vehicle sales by 47 percent. It also supported its previous forecast to produce 360,000 to 400,000 cars in 2019
The company also achieved a record in terms of vehicle production and deliveries, selling 95,200 cars, and producing 87,048 automobiles throughout the second quarter.
The company explained that the decrease in average prices of its cars during the second quarter contributed to the revenue shortfall.
The bullish case for Tesla
While the earnings results from both the first and second quaarters have been received negatively by markets, there are still many reasons to be bullish about the stock. In fact, this sharp decline may even present a buying opportunity for long term investors.
First, Tesla is more liquid than ever, following a nearly $3 billion capital infusion in May. Its cash position increased to $5 billion, the most cash in the company’s history, with $2.4 billion in net profits from its equity and convertible debt offerings in May, and $614 million in free cash flow.
Second, Tesla is growing aggressively, led by Elon Musk, a guy who is deeply invested in the future of the company. This, together with the electric vehicle maker’s vision for vertical integration, will likely be a crucial difference-maker as the consumers worldwide shift towards electric vehicles.
In addition to the growing preference for EVs, Tesla’s autonomous vehicle strategy makes it a very promising company as the world dives into a new era of automotive technology.
Tom Choi of Third Square Capital recently published an extremely bullish piece on the subject. In the piece, he highlighted Tesla’s disruptive product portfolio, competitive pricing structure and the company’s strong brand. Choi explained that Tesla shares could soar by as much as 236 percent in the next 2-5 years.