Tesla first-quarter results: good news, but not enough to impress Wall Street

Tesla Model S (pestoverde-CC BY 2.0)

There was a lot to like in Tesla’s first-quarter results, announced after the stock market close on Wednesday. Revenue and earnings both beat analysts’ projections, and the company reported steady progress on all fronts, from China to Model X to the Gigafactory.

So, did TSLA stock soar in response to the good news? It did not – the shares took a hefty hit in after-hours trading, and continued to sink Thursday morning. Many stock pundits were scratching their virtual heads over the apparent contradiction, but serious Tesla-watchers were less surprised. Expectations for the Silicon Valley standard-bearer are stratospheric – this is a company that aims to revolutionize the auto industry – and much of that is baked into the stock price. Nothing less than a spectacular earnings report is good enough to maintain upward momentum.

Tesla announced adjusted earnings per share of $0.12, which was above consensus estimates of $0.10 per share. Revenue for the quarter was $713 million, which also beat consensus estimates of $699 million. Tesla posted a net loss for the quarter of $49.8 million, compared to year-earlier net income of $11.2 million.

Tesla delivered 6,457 Model S during the quarter, roughly equal to its projection but slightly down from the record 6,892 sold in the previous quarter. It built 7,535 units, building up inventory as it began sending cars to China and continued shipping to Europe. The company expects to produce 8,500 to 9,000 Model S in the second quarter, and to deliver 35,000 cars this year, said CEO Elon Musk, adding that sales continue to be limited not by demand but by production capacity.

Tesla plans to release the right-hand-drive Model S next month in the UK, followed by Hong Kong and Japan later in the summer. However, it’s China that everyone seems to want to hear about. On a conference call with the press, analysts clamored for news of Chinese demand, even though Model S went on sale there only a couple of weeks ago.

Musk said that he’s been “blown away” by the level of enthusiasm both from buyers and Chinese government officials. Tesla had this to say in its shareholder letter:

After working for more than a year to secure proper government approvals, licenses and facilities, we delivered the first cars in China at customer events in Beijing and Shanghai last month. Each event enjoyed ample media coverage, complete with delighted Model S owners receiving their cars.

Tesla received further media attention thanks to the Shanghai government’s announcement that Model S drivers in the city will be entitled to free license plates, thereby avoiding the usual public auction price of $10,000 to $15,000 per plate. Since Model S pricing in China was already very competitive, this makes the car’s value proposition even more compelling.

With the help of the Shanghai government, we were able to construct a Supercharger station within just a few weeks of site selection. At the start of China deliveries we had three Supercharging sites open, each powered by clean electricity from solar panels.

“I really don’t think we’ll be demand-limited” in China, said Musk. “I think we’ll have to limit the number of cars we send to China,” to avoid shortchanging other global markets.

As for Model X, Tesla expects to have production-design prototypes ready in the fourth quarter of 2014, and to ramp up production in spring 2015. “There’s no question that we are delayed on the Model X,” Musk said, noting that it would not be launched until every detail was perfect. One example, he said, was the seal on the falcon doors, which needs to be watertight, noise-reducing, almost invisible, and durable.

Plans for the Gigafactory are charging forward – Musk announced that Tesla hopes to break ground on the first location next month, and a second location a month or two later. He also said that California is back in the running as a possible site, thanks to a push by Governor Jerry Brown’s office.

Hopefully calming fears that Panasonic was lukewarm on the Gigafactory, Tesla said that it has signed a letter of intent with the battery supplier, and that a final partnership agreement should be announced later this year. CTO JB Straubel said that the two companies have created a joint working team that’s working constantly to keep both companies “on the same page.”

Straubel and Musk also discussed precursor materials for the battery packs, which are supplied by other partners further upstream. There is a lot of opportunity for innovation and cost reductions in this part of the supply chain, and Tesla has had “interesting discussions” with some of the big mining companies.

 

Source: Tesla, Green Car Reports
Image: pestoverde/Flickr