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Tesla Analysts Eager for "Giga Factory" Details in Q4 Results

Company watchers are also hoping for hints about a second Model S production line.

Asa Mathat

We already know Tesla had a solid fourth quarter, after the luxury electric automaker gave away the goods during the Detroit Auto Show last month.

The Palo Alto, Calif., company pre-announced that it moved a record high 6,900 vehicles, breezing past earlier guidance by 20 percent.

But as Tesla unveils official earnings results after the market closes on Wednesday, analysts will be looking and listening closely for details about a forthcoming battery factory and possible second production line for the Model S sedan at the Fremont, Calif., plant.

Both are big deals because the company’s real challenge has been supply, not demand, with capacity constraints — particularly for the batteries that power the electric vehicles — keeping buyers on waiting lists for months.

During the third-quarter investor call, chief executive Elon Musk said of the forthcoming battery “giga factory”: “We are talking about something that is comparable to all of the lithium-ion battery production in the world in one factory.”

In a research note on Tuesday, analysts at Robert W. Baird & Co. said the stock could move on fresh hints about the plant: “Based on our channel checks, we believe TSLA is in a site selection process to determine which state will provide the highest tax benefits and subsidies for a battery factory, similar to the competition for Space X’s launchpad. Any details surrounding the factory would be a positive catalyst for the stock, in our opinion.”

Wedbush Securities analyst Craig Irwin agreed, adding that the positive news in the pre-announcement has already been digested: “If we were to see them announce another production line for the Model S and once we see a more credible roadmap for the giga factory, you’ll start to see people running the numbers, doing the math and asking the important question: What does this do for my valuation and how does this impact the overall execution profile for the company?”

Observers and investors will also, of course, be eager to see the final top- and bottom-line numbers, as well as guidance for the year.

Analysts expect the automaker to post earnings of 20 cents per share on $670 million in revenue, according to the average estimate from the Thomson Financial Network. That compares to a 79 cent per-share loss on $306 million in revenue during the year-ago quarter.

The earnings estimate crept up nearly a nickel following Tesla’s pre-announcement. The company attributed the improved output to “an excellent effort by the Tesla production team and key suppliers, particularly Panasonic,” which provides lithium-ion battery cells for the electric cars. It said the two big drivers of demand were the Model S’s safety record and performance under cold conditions.

Baird analysts Ben Kallo and Tyler Frank wrote that vehicle delivery for the year could come in between 30,000 and 32,000, above its earlier estimates of 29,000. They raised Tesla’s price target from $187 to $215. Shares closed at $203.70 on Tuesday, a record high and up 450 percent from a year ago.

Tesla had said upfront it would be investing heavily in the fourth quarter, increasing research and development spending by 25 percent as it gears up to launch its Model X sport utility vehicle later this year. The company is also pouring money into stores, service centers and “Supercharger” charging stations.

It’s all money well spent, Irwin said.

“People want to see a credible roadmap for some high volume sales — and investing to enable that is a good thing,” he said.

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