Why Tesla Shares Bombed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Tesla Motors (NASDAQ: TSLA  ) were shorting out today, falling as much as 10% after missing earnings estimates in its quarterly report.

So what: One of the more intensely debated stocks in the market, the luxury electric-car maker delivered a per-share loss of $0.65, worse than the $0.53 shortfall that analysts expected. However, there was plenty of good news in the report as CEO Elon Musk said he expects the company to be profitable in the first quarter, while analysts projected a $0.17 per-share loss for the current period. Revenue also topped estimates last quarter, coming in at $306.3 million. Musk said he expects Tesla to produce 20,000 vehicles this year, and analysts are projecting sales near $1.7 billion.

Now what: The market's reaction here is a little surprising. Tesla is clearly a long-term story, still without a profit, and its success will be determined the popularity and usability of electric cars, in particular the high-end models in which Tesla specializes. Higher production costs led to a bigger loss than expected in Q4, and Tesla will need to improve its gross margin, which was just 5.5% in its automotive segment in the last quarter. But the company appears to be on line to deliver in 2013. Given what looks like a bright future, today's drop seems like a good buying opportunity.


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