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Earnings preview: Will record deliveries help Tesla return to profitability in Q2?

The financial performance of Tesla (Nasdaq: TSLA) has been mixed in the recent quarters, and the electric car maker continues to give big surprises to the market. It will be publishing second-quarter results Wednesday evening, after reporting record-high deliveries for the period a few weeks ago. Meanwhile, the current volatility has left investors speculating about the effect of the upcoming results on the stock.

Earlier this month, Tesla said deliveries of the flagship Model 3 sedan nearly tripled in the second quarter, lifting total deliveries to a record high of 95,200 units. The strong performance comes on the heels of the company expanding the market for Model 3, mainly to Europe and China.

Tesla production and delivery trend

Several customers seem to have advanced their purchases ahead of the implementation of the cut in tax-incentives on Tesla’s electric vehicles. It is estimated that sales were also boosted by the low-priced variants of Model 3. The resultant decrease in averages selling prices, as well as costs associated with the ramping up of production facilities might put pressure on margins. Meanwhile, there has been a marked improvement in the company’s cash flow, mainly due to its efforts to achieve cost efficiencies.

Customers advanced their purchases before the authorities cut tax intensives on Tesla’s electric vehicles

Tesla might not report a profit in the second quarter, and the current trend shows that a full-fledged turnaround is unlikely in the near future. Wall Street analysts forecast a loss of $0.42 per share for the second quarter, which is sharply narrower than last year’s loss of $3.06 per share. The year-over-year improvement would come from an estimated 60% increase in sales to $6.42 billion. Earlier, the company had expressed hope of returning to profitability in the second quarter.

Earnings: Tesla (TSLA) reports net loss for Q1; revenues miss estimates

For the first quarter, the automaker reported a wider-than-expected net loss due to softness in vehicle deliveries and revenue growth. The loss, however, narrowed year-over-year to $2.90 per share. At $4.54 billion, revenues were up 33%. There was a notable decline in production and deliveries compared to the preceding quarters.

Related: Tesla Q1 2019 Earnings Conference Call Transcript

Recently, Tesla’s Chinese rival Nio (NIO) said total vehicle deliveries increased to 1,340 units in June from 1,089 units in May. The growth in the deliveries of the seven-seater SUV ES8 and five-seater SUV ES6 comes after two months of consecutive declines.

Nio deliveries rise in June

Last month, Tesla’s shares slipped to the lowest level in two-and-half years, after losing consistently since the beginning of the year. They gained 44% since then and are currently on the recovery path. Over the past twelve months, the stock lost about 13%, often underperforming the sector.

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