This Tesla Motors Inc. Earnings Report Will Make or Break the Automaker's Future

Tesla Motors (NASDAQ: TSLA  ) will release its quarterly report on Wednesday, and investors clearly have high hopes for the upstart automaker, having bid its stock above $200 for the first time last week. Yet even as Tesla has come of age in a strong environment for the industry, one big question facing the company is whether Ford (NYSE: F  ) , General Motors (NYSE: GM  ) , and other competitors automakers will catch up with it when it comes to innovation. Given Tesla's reputation as a forward-thinking car company, losing that innovative edge could prove disastrous.

The electric-vehicle maker inspires strong views from both bullish and bearish investors. Proponents argue that the company has been an industry disruptor, forcing Ford, GM, and the other large, established auto companies out of their comfort zones and into having to respond to ideas that could change major matters such as automotive customer service. Skeptics point to the miscues that have plagued Tesla, including vehicle fires that some believe could force the company to issue a costly recall. Let's take an early look at what's been happening with Tesla Motors over the past quarter and what we're likely to see in its report.


Source: Tesla Motors.

Stats on Tesla Motors

Analyst EPS Estimate

$0.20

Year-Ago EPS

($0.65)

Revenue Estimate

$669.98 million

Change From Year-Ago Revenue

119%

Earnings Beats in Past Four Quarters

3

Source: Yahoo! Finance.

Can Tesla earnings grow fast enough to keep investors happy?
In recent months, analysts have gotten more enthusiastic about Tesla earnings, raising their fourth-quarter estimates by a nickel per share and pushing up full-year-2014 projections by almost double that amount. The stock has responded quite favorably, climbing almost 40% since mid-November.

Tesla actually started off the quarter on a negative note, with its third-quarter-earnings report raising some questions about the sustainability of the company's growth. On its face, Tesla seemed to do well, with actual deliveries of 5,500 during the quarter representing accelerating growth on a sequential basis. Weekly production volume rose by about 10%, and gross margin continued to move upward. Yet investors apparently had higher hopes for the company, starting a drop in its stock price that would end up costing Tesla a third of its market capitalization at its worst levels in November.

Of grave concern to investors has been a string of fires involving Tesla's battery systems in its Model S sedan. The incidents have produced bad publicity and led to rumors that the company might have to issue a recall, even though CEO Elon Musk has noted emphatically that the rate of fires in Tesla vehicles has been relatively small compared to how many car fires internal-combustion vehicles produce. Nevertheless, with every new incident raising a media frenzy, Tesla has to accept that its cars will be under the microscope because of the company's success.

One key aspect of Tesla's future is the ability to export its success abroad. With Musk saying China could become the company's biggest market in the long run, Tesla could soar if it can start taking greater advantage of the luxury-car opportunity in this emerging market. Tesla has ambitious plans to get a third of its global sales from China this year, and taking its vehicles to other key foreign markets will be essential to maximize growth.

Tesla's good fortune has raised speculation about whether Ford or General Motors might move to acquire the company. With federal guidelines for fuel efficiency slated to rise in the next several years, an acquisition would give Ford or GM a leg up on compliance, as well as a shot in the arm in their respective hybrid and electric-vehicle sales, which haven't taken off in the same way that Tesla's have.

In the Tesla earnings report, watch to make sure that the company ends up exceeding its previous guidance of about 6,900 Model S deliveries for the quarter. With much of the stock's recent jump pegged to better than expected performance from its preliminary results, Tesla needs to keep delivering beyond investors' hopes if it wants to stay on an impressive growth trajectory. Kicking its growth into high gear could accelerate the stock's gains and make its recent performance look like just a small blip by comparison.

Find more stocks like Tesla
Stocks like Tesla are hard to come by, and when it comes to consistently finding huge winners, many have said it just couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Click here to add Tesla Motors to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (13) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 18, 2014, at 11:58 AM, navydog11 wrote:

    Don't know who decided to use the title for this article ("make or break the auto maker's future"), but this seems "sensationalist" and a bit counter to the Fool's long-term view on investing. I expect better out of Motley Fool.

  • Report this Comment On February 18, 2014, at 12:09 PM, englup01 wrote:

    Tesla is the safest car that has ever been on the road period. The stock is entering a new phase with potential suitors lining up. Apple was the first to make a proposal and at least two major auto manufacturers should feed more speculation very soon. The only question is what will the final acquisition price finally turn out to be. Hold onto your portfolios.

  • Report this Comment On February 18, 2014, at 12:11 PM, Albertico wrote:

    Title sounds a bit dramatic. Tesla has come short of investors' expectations before and they are still here.

    "Can Tesla earnings grow fast enough to keep investors happy?"

    Elon Musk has been very clear that he intends to expand the company for the long term. Almost all revenue/profit is used to speed up that expansion. Doubt anyone investing in Tesla is looking for a quick cash in, but more in the long term possibility of huge return if the company becomes a household name.

  • Report this Comment On February 18, 2014, at 12:28 PM, dmarepula wrote:

    Absolutely agree with you Albertico.

    I don't think Elon Musk cares as much about the company's stock price as other CEOs; he's in this for the long haul. I'm sure he and his team have a clear road map of milestones they plan on sticking to regardless of what short term investors and analysts talk about.

    Reminds me of the saying from the movie, Body of Lies... "Urgency does not call for changing methods that work, for methods that do not work."

    If the price takes a dip tomorrow, that's okay... it's just a chance for us to add to our positions.

  • Report this Comment On February 18, 2014, at 1:34 PM, Foolaloof wrote:

    The key to relying on a Musk-led company's performance is to remember what he predicts vs. what the street predicts. So far the only performance disappointments have been relative to the street's manufactured expectations, not Musk's.

    Tesla will survive the tabloids-on-steroids approach to investment "advice" - precisely because those with ethics (I'd like to think of Fools as leading this enlightenment) will keeping noticing:

    Musk underpromises and overdelivers.

  • Report this Comment On February 18, 2014, at 10:39 PM, MURF wrote:

    I will be VERY disappointed if Tesla is sold to anyone! The only way for Elon to accomplish his objective for EV's is to NEVER sell the company! Never forget what happened to Tucker & every other industry disrupter. Elon will NOT betray his core principles. Bought @ $28. Tesla is my retirement package & someone needed to disrupt the car industry.

  • Report this Comment On February 19, 2014, at 6:11 AM, dmarepula wrote:

    Congrats on getting in at $28 MURF. Glad you had the foresight and courage to take the plunge. My wife and I got in around $35 and around $50 for Solar City. Hoping to retire on these as well...

  • Report this Comment On February 19, 2014, at 9:18 AM, RobertFaheyJr wrote:

    It will make or break the company's future if you're a trader who doesn't ponder the future at all. For longs like me, even the last quarter didn't faze me. The stock dropped quite a bit, but bounced back a few months later. Big deal ...

  • Report this Comment On February 19, 2014, at 9:50 AM, tsnoah wrote:

    This is the dumbest title for an article I have ever seen on the Fool.

  • Report this Comment On February 19, 2014, at 10:52 AM, mdisen wrote:

    Only a Sith deals in absolutes.

  • Report this Comment On February 21, 2014, at 8:09 AM, pondee619 wrote:

    Dan:

    Earnings are in. Did they make or break the future of Tesla?

    "This Tesla Motors Inc. Earnings Report Will Make or Break the Automaker's Future"

    WELL? Do you have an opinion on YOUR premise, or were you just talking?

  • Report this Comment On February 21, 2014, at 9:08 AM, TMFGalagan wrote:

    @pondee619 -

    I was pleased with the report. I think Tesla avoided breaking its future, especially with its plans to greatly expand production in the coming years. Tesla could run into unforeseen problems, but I'm optimistic about the business prospects - even if I'm not sure the stock hasn't already fully reflected them.

    best,

    dan (TMF Galagan)

  • Report this Comment On February 21, 2014, at 4:01 PM, pondee619 wrote:

    That's a lot of double speak, Dan.

    pleased with the report;

    avoided breaking its future;

    could run into unforseen problems;

    optimisitc about the business prospects;

    not sure the stock hasn't already fully reflected them.

    You said this report was make or break. I guess that wasn't quite correct. Still leaning both ways. But, thanks for the reply.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2842728, ~/Articles/ArticleHandler.aspx, 10/24/2014 10:57:09 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement