It turns out that money furnaces don’t have to burn down the house. They can just keep you warm. That was the case with Tesla TSLA +0.20% , which reported earnings last week.
Back in June, Tesla (ticker: TSLA) CEO Elon Musk called his company’s new production facilities in Austin, Texas, and Berlin, Germany “money furnaces.” That ignited fears that the second quarter cash burn was going to be much worse than expected. Things didn’t turn out as badly as feared and shares rallied after earnings were released.
Musk’s words were heavily debated this past quarter. From before his comment to July 20, the day Tesla reported second-quarter numbers, Tesla stock underperformed the Nasdaq CompositeCOMP –1.87% by 2 percentage points. Tesla shares were about 5 percentage points better than the Nasdaq for the month coming into Musk’s comments.
What’s more, Tesla’s second-quarter earnings per share estimates dropped from about $2 to $1.80 s share in the aftermath of “money furnaces.” New Street Research analyst Pierre Ferragu warned that investors should expect break-even free cash flow in the quarter, down from $2.2 billion generated in the first quarter of 2022.
