Dow Drops Ahead of Tesla Motors' Make or Break Earnings Report

U.S. stocks have been flat today, but anticipation is building for Tesla Motors' earnings report.

Feb 19, 2014 at 3:30PM

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.

U.S. stock markets have had a bit of an up and down day on Wednesday, and as of 3:30 p.m. EST the Dow Jones Industrial Average (DJINDICES:^DJI) was down 0.41%. The only notable economic news was the Department of Commerce report that seasonally adjusted U.S. housing starts fell 16% to 880,000 in January, well below the 945,000 estimate. Cold weather likely hurt starts considerably, so don't read too much into a single number. Instead, look to see whether the situation continues or reverses course as the temperature heats up.

One of the more interesting items of the day will be fourth-quarter results from electric car maker Tesla Motors (NASDAQ:TSLA), which are due after the bell.

Tesla's moment of truth
One of the challenges for a high-flying stock like Tesla is the demand to hit its numbers quarter after quarter to please investors. We know already that Tesla shipped about 6,900 Model S cars in the fourth quarter, which was roughly 20% ahead of its own expectations.  

Tsla Model S Image

The Model S will fuel Tesla Motors' growth in the fourth quarter.

The next step will be to see if both supply and demand are going to pick up in 2014. Wall Street is expecting as many as 32,000 Model S vehicles to be shipped in 2014, but a higher figure might be needed to please investors. The company reached a run rate of 27,600 in the fourth quarter, so I'd expect even more growth than that.  

The next number to watch is gross margin. Tesla plans to be one of the highest-margin auto manufacturers in the world with a gross margin of about 25%. CEO Elon Musk has already predicted the company will reach that figure in the quarter it's reporting today. Falling short would be disastrous and so would guidance below 25%. But if Tesla can deliver big margins again investors would be ecstatic.

Finally, look for an update on the Model X, which is due out late in 2014 or early 2015, as well as updates on internal battery manufacturing. The Model X crossover is the next growth engine for Tesla and any delays in its launch would hurt growth potential over the next two years.

As a public company Tesla has so far hit the ball out of the park, beating expectations on all of the factors I mentioned above. But with the stock up nearly 430% over the past year expectations have been raised and Tesla needs to do it again. In a short time we'll find out if Musk can work his magic another time.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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