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Is Tesla's Worst-Ever Loss Cause for Concern?

By Motley Fool Staff - Feb 26, 2018 at 12:56PM

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Here's why investors should be watching Tesla's financial statements closely.

On this segment of Industry Focus: Energy, host Sarah Priestley is joined by Motley Fool contributor Daniel Sparks to discuss how despite a 44% jump in revenue, Tesla's (TSLA 2.55%) fourth-quarter adjusted loss widened quite a bit in Q4, from a loss of $0.69 in the year-ago quarter to $3.04 in the fourth quarter of 2017. Daniel notes that the company expects to significantly ramp up car deliveries. If it succeeds, the losses may end up being viewed as "well-timed investments."

A full transcript follows the video.

This video was recorded on Feb. 22, 2018.

Sarah Priestley: A pretty interesting quarter. It's not often that you see a company announce its worst quarterly loss and also record revenue. Per-unit vehicle production costs were negatively impacted by the company's gross profit margin. Daniel, what did you make of the results?

Daniel Sparks: This is really a typical Tesla fashion here, when you have record revenue and widest-ever loss. Of course, the results were better than expected, even that wider than expected loss, on an adjusted basis. But it's still a trend that investors are taking notice of, just because, the loss comes in narrower than expected. Investors should look at these numbers and maybe take some time to look at the financial statements, because these are enormous losses. And we'll getting into the huge negative free cash flow Tesla reported in 2017 in a bit. But if Tesla continues down this road, it would be very concerning. Of course, they are laying the groundwork for significantly higher deliveries this year. Tesla does expect sales and gross profit to jump this year. If that does happen, of course, in retrospect, these could look like well-timed investments, a year of very smart investment. But if it doesn't pan out as expected and delays persist, that could be an issue. That's kind of how I'm looking at the quarter.

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