What to Watch Ahead of Tesla's Second-Quarter Earnings

Tesla Motors (NASDAQ: TSLA  ) is one of the best-performing stocks this year, having so far gained more than 221% year to date. However, that can be a crushing figure if you missed the opportunity earlier this year to get in on the stock. Fortunately, you may have another chance to scoop up shares. With the electric-car maker set to report earnings after the bell on Aug. 7, there's a lot of pressure on the stock. Let's take a closer look at what analysts are expecting ahead of Tesla's second-quarter report, and whether the company will live up to expectations.

Buckle up; It's going to be a bumpy ride
If you were lucky enough to pick up shares of Tesla at the peak of this week's sell-off, kudos to you. The stock has since rebounded more than 10% to where it's currently trading around $119 per share. However, if you missed out, don't be too hard on yourself. There may be another buying opportunity after the stock reports its Q2 results in.

The EV maker kicked off fiscal 2013 by posting its first profitable quarter as a public company. For its first quarter ended March 31, Tesla earned $0.12 per share on revenue of $561.8 million. Better still, since Tesla reported those impressive results on May 8, the stock has climbed from $55 a share to an all-time high of $133.

So what?

Well, for one thing, investors shouldn't expect the same caliber of results for the company's upcoming quarter. For Tesla's second quarter, you can bet the EV maker won't be touting profitability. In fact, Tesla will probably post a net loss because of its new lease-financing plan. To be fair, Tesla's CEO Elon Musk warned analysts about this back in May on the Q1 conference call. Still, I wouldn't be surprised if the stock were to move on the news.

Ultimately, Musk believes the impact of this lease accounting on Tesla will be a positive for the company -- and why wouldn't it be? After all, it means Tesla is selling more cars through its new financing program. Moreover, we can also expect operating costs to have swelled in the second quarter because of Tesla's buildout of its Supercharger Network, as well as opening new retail locations . Nevertheless, the company hopes to be around breakeven on cash flow from operations despite these and other ongoing investments. In total, Tesla plans to spend around $200 million this year on capital expenditures.

Speeding ahead
Investments are the key here, because Tesla continues to invest in its future. From building out the Supercharger Network to launching operations in Europe and Asia, this is a big year for the company. Not to mention that at its current upstart size, Tesla is now cranking out at least 500 cars a week, according to a recent video from Bloomberg. Furthermore, I suspect the stock's momentum will continue as its all-electric cars become more affordable with the rollout of the Model X, and later the Gen III. "Tesla makes the best product in an industry that makes $1.5 trillion in annual sales," said Andrea James, an analyst for Dougherty & Co. This is a momentum stock with plenty of staying power.

As we approach Tesla's second-quarter report, I plan to add to my position if the stock takes another dip. True, the severe spike in stock price has Tesla trading at an outrageous multiple. However, the reason the stock is always quick to bounce back is that there's support from long-term shareholders who care less about valuation and more about the wild growth Tesla is succeeding.

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9/30/2016 4:00 PM
TSLA $204.03 Up +3.33 +1.66%
Tesla Motors CAPS Rating: **