Understanding Quarterly Progress

Investors typically look at quarterly and annual reported operating results on a year-over-year basis.  In other words, what was the percentage change compared to the prior year period.

It is important to also consider sequential change.  That is, what was the change compared to the previous quarter.  Obviously this is not particularly helpful in looking at operating results in highly seasonal industries, for example.

Without weighing in on the merits, a look at Tesla’s quarterly vehicle sales is instructive.  First quarter 2017 sales of approximately 25,000 Model S and Model X vehicles were some 70% ahead of the year ago period.  However, quarterly sales of Tesla vehicles have approximated 25,000 units in each of the last three quarters and are projected to range between 22,000 and 25,000 vehicles in the June 2017 quarter.

Do current levels of quarterly sales of 25,000 Model S and Model X vehicles represent all the company make, or all the company can sell?  In addition, any analysis of Tesla’s historical data, should also take into consideration the potential impact of the pending start of shipments of the enthusiastically expected Model 3.

To be clear, the foregoing discussion is not intended to represent an analysis of Tesla, but rather, is intended to be instructive in assessing the possibility of different messages from comparing quarterly results on a year-over-year basis versus a sequential basis.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®