First-quarter results from Tesla Inc. TSLA -5.55% weren’t as bad as Wall Street feared. That should be of minimal consolation to its shareholders.
The electric-vehicle giant reported sales of $3.4 billion and an adjusted loss of $3.35 a share.
Analysts had predicted an adjusted loss of $3.54 a share. That is hardly a cause for celebration; the loss was much worse than the $2.02 a share they predicted when the quarter began.
More important, Tesla burned about $1.1 billion in free cash in the quarter. Investors reading the earnings release may not have noticed, since Tesla removed it from the spot where it usually appears. Tesla ended the quarter with about $2.7 billion in cash on its books. That cash balance barely covers the portion of its long-term debt and capital leases due this year.
Meanwhile, as has become all too typical, Tesla hedged on its more ambitious targets. It still expects to reach its production milestone of 5,000 Model 3 sedans a week “in about two months.” That forecast comes with a caveat: “our prior experience has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time.” Another slip in timing would mark the fourth time this forecast has been delayed since last summer.
There are certainly steps Tesla can take to rebuild its cash balance. For one thing, Tesla says it expects to turn a profit in the third and fourth quarters of this year. But there is simply no reason to take their projections about the future seriously. It could raise fresh capital, which CEO Elon Musk has claimed isn’t necessary.
The company is trying to conserve cash. Tesla said it now expects to reduce its capital spending to less than $3 billion this year, down from an expected $3.4 billion. Accounts payable jumped to $2.6 billion, an increase of more than $200 million from the end of last year.
Meanwhile, Mr. Musk suddenly isn’t chatty about Model 3 demand. On a conference call with analysts, he cut off a question about the rate at which reservations convert to orders, dismissing the query as “too dry.”
Tesla’s shares are flat this year despite mounting problems. Dreams can’t support Tesla’s $50 billion market value forever.
Appeared in the May 3, 2018, print edition as 'Tesla Can’t Shake Cash Worries.'