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May 8 2015, 07.35am GMT


Tesla Motors reported narrower loss than expected in Q1 but cash required to grow the business is a concern for Wall Street

For the first quarter, Tesla Motors Inc. (NASDAQ: TSLA) reported a smaller-than-expected loss yet they spoke confidently about the demand for the company’s new stationary batteries and its cars. Despite this, there is however concerns from Wall Street about how much cash the company is required to spend in order to grow the business, despite the impressive first quarter earnings from the electric car manufacturer.

Late Wednesday, Tesla announced adjusted $45 million net loss, or 36 cents per share, compared to the adjusted earnings last year of 12 cents per share. The adjusted revenue for Tesla hit $1.1 billion. Expectations from analysts surveyed by FactSet were for 50 cents per share loss on $1.04 billion in sales.

After the results, Chief Executive, Elon Musk said in a conference call with analysts that the demand for the company’s new stationary commercial and home batteries was “crazy off the hook.”

However, the company’s cash flow has been depleting from one year to another and from quarter-to-quarter. Tesla’s cash was down by around $900 million on the year and more than $500 million quarter-to-quarter.

In a note on Thursday, Morgan Stanley analysts said that at the current rate Tesla is burning cash and with the assumption that no capital injections are fronted from external sources or warehouse facility drawdown, the company would exhaust its gross cash of $1.5 billion in about three quarters.

According to analysts at Morgan Stanley, led by Adam Jonas, with the near-term expenses, the 2nd quarter cash spending requirements could be more that the 1st quarter’s, which would see the company be left with less than $1 billion in cash by the middle of the year, just as it plans to release the Model X. Adding to this, they said that a lot is dependent on the SUV’s success and the company may find itself requiring higher liquidity.

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