Tesla Stock Drops on Q1 Earnings 0

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Electric-car maker Tesla just issued its Q1 financial results based upon producing a record 7,535 Model S Sedans this quarter (slightly above guidance). The company delivered 6,457 units and lost $50 million while making its first deliveries into China. The company seized upon the opportunity of a strong stock price to raise $2.3 billion in convertible notes offerings in Q1 as well.

Tesla CEO Elon Musk suggested that the firm would ship 7,500 units in Q2 and is on track for more than 35,000 Model S deliveries in 2014.

Takeaways from Tesla Q1 shareholder letter and earnings call

  • Increasing factory capacity to support increase in Model S production later this year
  • Introduction of Model X next year; production design prototypes ready in Q4
  • Delivered the first cars to China in April and has plans to rapidly expand there; firm believes “the country could be one of [its] largest markets within a few years”
  • Accelerating the opening of new stores and service centers by 75 percent in 2014
  • Regarding the company’s controversial direct-to-consumer sales model, Musk had this to say: “While consumers and the vast majority of jurisdictions have overwhelmingly welcomed our direct-sales model, there are still a few states in the U.S. where we face resistance. In those states, we continue to fight to protect our customers’ ability to buy directly from Tesla. We believe strongly in the fairness of our position, which has been supported by a long list of consumer activists, economists and influential policymakers.”
  • Launching the right-hand drive Model S in the U.K., Japan and Hong Kong later this year
  • Production is now at almost 700 vehicles per week, rising to 1,000 vehicles per week by the end of 2014
  • Gross margin improved to 25.4 percent despite a $2 million reserve for underbody shield retrofits. Gross margin is anticipated to reach 28 percent in Q4.
  • “The Giga factory project is on course to begin battery cell and pack production in 2017.”
  • The company expects to be “marginally profitable” in Q2
  • Tesla has signed a letter of intent with Panasonic to partner on the Giga Factory. Musk cited conversations with mining companies to reduce cost on nickel or cobalt precursor materials.

The stock is down almost 9 percent this morning, with investors possibly spooked by weak EPS guidance.

Investment bank Baird comments, “TSLA’s quarter was good, beating Street estimates, but the stock will likely be under pressure against a market that dissects high multiple stocks. With that said, our long-term thesis remains intact as TSLA progresses on all fronts including Model S sales, infrastructure build-out, and new model developments. We would be aggressive buyers of the stock.” The bank writes, “Demand [is] still not an issue and deposit growth accelerated sequentially. Bears argue demand is slowing, but customer reservations accelerated during Q1 and increased 21 percent quarter-on-quarter.”

Morgan Stanley has predicted a decline in North American deliveries in 2014.

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Some details on the proposed Giga Factory from previous GTM reporting:

Tesla founder and CEO Elon Musk is soon to announce the location of the firm’s $5 billion Giga factory, the immense complex where the EV maker’s next-generation battery packs will be built. We’ve reported on the deep politics in Texas, Arizona, Nevada and New Mexico as politicians in these states vie for the promise of manufacturing jobs.

Musk is naming two sites, according to Bloomberg, saying, “What we’re going to do is move forward with more than one state, at least two, all the way to breaking ground, just in case there are last-minute issues.”

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