Tesla downward revision is among the biggest
Tesla Motors Inc. is one of a handful of companies whose quarterly results have caused quite a stir among the financial experts.
And this is not a good thing, as it takes some seriously poor performance to stand out amidst a crisis of this magnitude, but companies like Yelp, Tesla and Zynga have certainly managed to get on the list.
And the list in question is not even that long. In fact there are only five entries so far. First of all, there is Tesla Motors Inc. Aside from them, there is the Pandora Media Inc., Groupon Inc. as well as the aforementioned Yelp Inc., and Zynga Inc. Apparently, this list was assembled by Estimize, a platform which is crowdsourced, so the influx of big capital should be negligible, at least in theory.
Furthermore, Estimize did not assemble this list on a whim; there is an entire congregation of experts, analysts and academics, whose opinions are complemented with that of ordinary investors in order to make the most out of the data available. Here is the reasoning behind their estimates and opinions. Let us start with Tesla.
Tesla’s profits have been declining steadily for the past few months. At one point, it seemed like Elon Musk will do the impossible and produce an economically feasible and practical electric car that will gradually replace any and all gas-guzzling alternative. However, the public is still waiting, and as the demand for electric cars dropped, so did the earnings. In fact, per-share earnings have almost halved in the last three months alone.
The main cause of this recent downfall can be attributed to the company’s spending spree. Their executives seem to have forgotten that in order to facilitate profit growth, the expenses need to be curtailed and contained, while the income needs to grow exponentially. In other words, they have been spending a lot more money than they have been making and the results are showing.
In fact, according to Estimize the company has been spending almost half of their revenue on operating expenses. Add to that the costs of launching a brand new SUV line and trying to construct and mass produce a more practical battery and this is the result. The SUV is still fighting for its place on the open road and the prudence of this heavy investment has yet to be proven. However, this will not happen without a reliable battery that is practical, safe and more economical than the ones Tesla uses today. Meanwhile, their shares have dropped roughly a third of their value over the last twelve months.
Yelp, on the other hand, had a mishap when the report was sent ahead of schedule. The initial consensus for both Estimize and Wall Street was around 4 cents loss per share and $152.5 million revenue. In fact, Yelp actually managed to defy most predictions. The online review site had 11 cents earnings on a single share and a revenue that is slightly greater than initially expected – $153.7 million.
People remember the gaming company called Zynga for its catchy games like Texas HoldEm and FarmVille, whereas most investors remember them as a promising new company. Nowadays, however, they tend to remember that Zynga has not seen a major game success in years and has delayed games on at least two separate occasions. Naturally, this does not bode well for their profit margin. The estimates on their earnings per share as well as their revenue are both down by more than 10% each. In fact, their overall revenue is expected to drop by more than 15%.
As for Groupon, forecasters predict their per-share earnings dropping by at least a third. This coupon company’s overall income is actually expected to remain unaffected, with only a nominal drop of 2%. Overall, it remains to be seen just how will the numbers hold up in their report. These are the forecasts made by Estimize’s experts and are far from being set in stone.
Finally, there is the streaming radio service by the name of Pandora Media Inc. Their numbers are expected to drop even lower. Their per-share income will most likely drop by almost 12%, while their revenue will be roughly two thirds of what it was three months ago. In any case, the exact numbers are expected any day now, so it remains to be seen just how accurate Estimize assessment really was.