Why Tesla Motors Inc. Stock Has Become Electrified Again

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 electric-car maker Tesla (NASDAQ: TSLA  ) are being driven higher following reports that it delivered 6,900 vehicles in the fourth quarter.

So what: The final tally of 6,900 deliveries represents 25% more than the third quarter and over 15% more than the amount Tesla guided for. In its third-quarter-earnings release, the company stated that it expects to deliver "slightly under 6,000" vehicles.

Now what: This announcement follows Tesla's trend of under-promising and over-delivering, in this case literally. An extra 900 vehicles priced around $100,000 each adds over $90 million in extra revenue for the company in the fourth quarter. 

With Tesla forecasting 25% gross profit margins, it's reasonable to expect at least an extra $22.5 million in gross profit, most (if not all) of which should find its way to the bottom line, potentially adding $0.18 per share.

Analysts forecast earnings per share of $0.15, so it is very possible that earnings may top this estimate by more than double.

Tesla last quarter guided for 21,500 total vehicles delivered for 2013, and the company plans for a production run of 40,000 vehicles by end of 2014. Now, the actual total for 2013 is 22,400, and the run rate for the fourth quarter should be 27,600, so it would seem that the target for 40,000 deliveries in 2014 is off to a good start, especially considering that it isn't until the second quarter of 2014 that Tesla expects the larger boost from production capacity.

Look for analysts to upgrade their estimates, and for Tesla to offer even higher estimates, for the first quarter of 2014 and the full year. While even $0.30 earnings per share for the fourth quarter would still suggest that Tesla is richly valued, both the top and bottom lines stand a chance of accelerating, and it could be only a matter of time before earnings begin to catch up with valuation. Tesla may not be for everybody on the long side, but cautious Fools should avoid betting against Tesla.

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Read/Post Comments (7) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On January 15, 2014, at 4:51 PM, me2dumb4college wrote:

    Great product, great support, great company... this is what happens when you short Elon

  • Report this Comment On January 15, 2014, at 6:19 PM, oTeslaManiax wrote:

    People should read the tea leaves... Government sold their GM shares at a loss of $10 billion, Al Core says the biggest bubble are oil stocks, analysts expect oil price to drop dramatically this year (to stop the green movement), Elon will announce the world's biggest battery plant in a month with the partners. Model S is kicking the butts of all cars in its class... the consumer has spoken. Tesla is the first mover to create a giant paradigm shift for transportation.... other auto makers will follow... Nissan and Volkswagen are talking the same battery technology as Tesla... The Fuel Cell camp don't get it... it's the pump ! No one wants it anymore.

  • Report this Comment On January 15, 2014, at 9:09 PM, Phrontrowalpine wrote:

    Tesla doesn't just make cars, the valuations per car are a bad "per" example. Tesla is going to make or be a part of doubling the lithium ion battery market, distributing battery packs for homes and businesses to run on and cut peak rates from utility companies, they are going to dramatically change the aluminum market for autos, let alone the entire auto industry, not to mention their own net-zero supercharging grid, did I even mention their award winning car? The stock is not just emotional, there is much more backing it up than just a car.

  • Report this Comment On January 15, 2014, at 11:05 PM, jetamerica wrote:

    TSLA is a $20 stock masquerading as a $165 stock. The numbers make no sense. GM or Ford make as many units in a day as TSLA makes in a year . Fords market cap is $63 bill. and TSLA is $20 bill. Ford sales are $160 bill. TSLA's are $2. Ford and GM are profitable and TSLA loses money even after Gov't handouts to its wealthy buyers. It is a nice car with a limited audience and one factory worldwide-anything selling outside the USA is manufactured in CA and must be shipped.

    People like the car-so do I. But that is not a good reason to buy the stock.

  • Report this Comment On January 16, 2014, at 12:24 AM, Ustauber wrote:

    Thxtsla

  • Report this Comment On January 16, 2014, at 8:51 AM, MovingMagic wrote:

    Many are confusing Tesla with a car manufacturer. Tesla is not a car manufacturer. Tesla is selling a dream, a vision, a hope. Sustainable energy and transportation for humankind. Independence from oil (that will avoid a war or two), a clean environment, free driving (all supercharger stations are free forever). So do you wish this vision for yourself, your fellow men and for your children? Are you such a person? What about the big car companies? Did you ever hear a CEO wishing his competition would be successful, like Elon Musk does? Did you think that fuel cell infrastructure will be free for all? No, every other car maker is trying to squeeze as many dollars as possible from your pockets by keeping repairs high, filling your car expensive. No other CEO has the vision of Elon Musk. So I only have one short message for this exceptional CEO: Live long and prosper!

  • Report this Comment On January 16, 2014, at 12:02 PM, Threemagisteria wrote:

    @jetamerica: I think you are forgetting that Tesla is a tech company as well as a car company.

    Imagine if, at a time when Daimler was selling not nearly as many vehicles as the major horse-drawn carriage manufacturers, he secured patents on pretty much every component of the automotive internal combustion engine, plus the patents on refining gasoline from crude oil, plus the patents on gas pumps, and had also constructed the world's only network of gas stations.

    I do not know how or when or even if EVs will dominate personal transport, but people who think that it will happen sooner rather than later are foreseeing a world where pretty much everything on the road is either a Tesla or built with Tesla tech or recharging at Tesla stations or at stations that use Tesla tech, and where Tesla software and Tesla-designed tools are used in every EV repair shop. If these optimists are even one-third right, hindsight will rule that Tesla's stock price was justified.

    Personally, I think the majority of buyers are premature - the Age of the EV may be dawning, but it could easily take a generation to flower. I'd definitely hold onto Tesla stock, but I wouldn't buy now except as a long-term investment.

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