Tesla shares leaped higher after chief executive Elon Musk said the electric car maker beat Wall Street's revenue expectations, apologized for prior bad manners toward analysts and reiterated a promise for future profitability.
Tesla's stock jumped 9 percent in trading Thursday.
Oppenheimer, which upgraded Tesla shares to outperform following the earnings report, told clients the company may finally be on track with Model 3 production.
"With higher volumes and slower spending, we believe Tesla has reached a critical inflection point in its development," the Oppenheimer analysts wrote. "While we have been cautious on Model 3 ramp, we believe gross margin performance on Model 3 will carry the stock over the next 12 months or more."
Even Goldman Sachs — which has consistently advised clients sell Tesla stock (and continued to do so Thursday) — conceded that the quarter was "solid" for the Palo Alto, California-based company.
"This was a positive quarter. Automotive gross margins, cash burn, and ending cash balance were better than expected. In addition, the company may have turned the corner on its historical operational mis-execution," the Goldman note read. "We see the second quarter as a positive step for Tesla as a manufacturing organization, but a step that requires continued forward momentum in cost control, operating efficiency, and ultimately positive cash flow."
Here's a wrap of all the major analyst opinions:
"This was a positive quarter. Automotive gross margins, cash burn, and ending cash balance were better than expected. In addition, the company may have turned the corner on its historical operational mis-execution —further noting they have learned from past experiences and expect to improve capital efficiency at new plants going forward. However, improvement from historical launches was also communicated for both the Model X and Model 3 launches. As a result, we see 2Q18 as a positive step for Tesla as a manufacturing organization, but a step that requires continued forward momentum in cost control, operating efficiency, and ultimately positive cash flow. In that vein, we still see shares as over-valued. We believe there is uncertainty as to whether the company can convert the interest they are seeing in the Model 3 into growing orders at the higher price point offered as well as sustain that level through the initial pent-up demand phase, reduced tax credits, and incremental EV competition. Further, the company needs to control its opex —which was slightly better vs. our estimate for the quarter, but the 2H18 trajectory is higher than we previously forecast."
"We upgrade to Outperform and introduce a $385 PT. While we have been cautious on Model 3 ramp, we believe gross margin performance on Model 3 will carry the stock over the next 12+ months. As we highlighted in our July 30 note, incremental GP for the Model 3 has the potential to generate sufficient cash for Tesla to reach positive operating cash flow. With higher volumes and slower spending, we believe Tesla has reached a critical inflection point in its development. We expect bearish arguments now to focus on limited potential for Model 3 volume at higher price levels. We note that despite some recent price pressure, Model S and X average selling prices have remained at relatively elevated levels. We would not be surprised to see a similar scenario play out for Model 3."
"'I'm Still Standing' is an up-tempo song by Elton John about triumph in the face of adversity. And it sums up our thoughts on Tesla's second-quarter earnings report and outlook — that a major step function up in third-quarter revenue will strongly counter the popular narrative around bankruptcy risk, thus reducing an estimated $12 billion in short interest and driving shares higher."
"We expect the focus will now shift from production to growth and the market opportunity for Model 3. Along those lines, Tesla made several positive comments around Model 3 demand: Model 3 exceeded 50 percent share of the mid-sized premium sedan market in the U.S. for the first time in July, four of the top five vehicles traded in for Model 3 were from lower price points (Toyota Prius, Honda Accord, Honda Civic, and Nissan Leaf), and Tesla has received over 60,000 requests for Model 3 test drives, and early results indicate that the test drive-to-order conversion ratio is higher relative to Model S."
"Relative to our estimates, nearly every P&L metric was a bit light, including revenue, gross margin, and operating expenses. However, Tesla recorded roughly $700 million in cash burn in the quarter, which was, admittedly, better than expectations for a cash burn level similar to the first quarter of 2018 at around about $1 billion, and will likely be construed positively by investors as indicative of a forthcoming inflection point."
"Following the somewhat mixed second-quarter results, we are slightly revising our forward estimates, specifically our 2018 EPS estimate from $(6.00) to $(6.50) and 2019e from $(0.50) to $(1.25), but leaving our out-year estimates (2020-2021) unchanged. However, consistent with the rest of our coverage universe, we are now moving our valuation basis year for Tesla to 2019."
"Unsurprisingly, Tesla reiterated its forecast for profits and positive cash flow for the third quarter, a target we don't think it'll reach excluding zero-emission credits, but is plausible in light of potential substantial zero-emission credit sales. Tesla is once again showing its Model 3 comps as BMWs and Audis – which, along with the move to open up orders to non-reservation holders for higher-priced variants, makes us wonder what this does to the idea of the Model 3 being the $27,500 mass market Camry killer that 450,000 reservation holders had lined up for. We still have fundamental concerns with the actual demand for the higher priced variants, and whether the company can generate gross profits from a lower priced variant sufficient to cover opex."
"We are maintaining our earnings estimates as 2Q results were ~in-line. We raised our Q3 & Q4 delivery estimates, but lowered our margin based on guidance. We also noted some risks in the outlook. While TSLA guided to a 6k/week rate ending August, the Q3 guide 50-55k implies only ~4k/week & indicates 5k/week rate may not be sustainable. Moreover, TSLA implied it plans to keep its GA4 line (the "tent"); we see risk to quality & reputation given challenging working conditions. Lastly, TSLA offered configuration options to reservation holders at the end of Q2, though this had little impact on Q2 deposits (TSLA noted opening it to non-reservation holders helped in early Q3). Given the long wait time already, this seems to indicate many of the reservation holders are waiting for the $35 version and affirms our cautious view on pricing.."
"We believe many aspects of Tesla's outlook commentary need further explanation. For example the statement that they expect to generate positive cash 'including operating cash inflows and capital expenditures, as well as the normal inflow of cash received from non-recourse financing activities on leased vehicles and solar products' leaves a rather large range of outcomes for how free cash is actually created."
"After three quarters where investors have been in the dark with respect to estimating Model 3 volumes and margins, Q2 felt like there might finally be some light at the end of the tunnel. Come Q3, we may even be able to see the end of the tunnel, or Elon's "Production Hell". Tesla expects to produce 50-55k Model 3s in Q3, numbers which look credible to us (the company has intermittently reached 5k a week in July and is targeting 6k by end of August) and are broadly in-line with street expectations. Where we have increased confidence is around Model 3 gross margin expansion in coming quarters given Q2's implied gross margin (Q1 was roughly -20%, Q2 0% to -5% and Q3 guided at 15%, Q4 20%). With this in mind, we believe Tesla can be profitable at the EBITDA line at Q3 and likely will be profitable at the EPS line by Q4. We expect to see 10-20% positive gross profit revisions for 2018 and 0-5% for 2019 and 2020.."
"Tesla's forward commentary was mostly better than feared and the CEO worked to restore some faith and credibility with investors that he can be a plus to the investment narrative, not a minus. Our near-term bias on shares remains positive, but we remain Sector Weight as over the longer term, as margins, growth, and multiples normalize, we expect investors to find that significant premium around perceived innovative superiority has already been well priced-in."