2 Surprising Takeaways From Tesla's Fourth-Quarter Report

Investors pushed shares of Tesla Motors to an all-time high this week after the electric-car maker delivered solid fourth-quarter results.

Feb 21, 2014 at 8:01AM

Tesla Motors (NASDAQ:TSLA) stock climbed to a fresh high this week after the electric-car maker reported impressive fourth-quarter results and offered better-than-expected guidance for the year ahead. Investors pushed shares of Tesla up more than 15% to $223.32 after the market close Wednesday on the news, and the stock was priced around $209 a share at close on Thursday. 

However, instead of rehashing the company's much talked about earnings results, let's take a closer look at a few of the overlooked details that emerged during Tesla's call with analysts last night.

Twitter saved Tesla's sales from going up in flames
Social media saved Tesla from shrinking demand caused by the media firestorm over recent Model S fires, according to the company's outspoken CEO, Elon Musk. Customer deposits, or reservations, as they used to be called, were up 16% in Q4. However, that almost wasn't the case. On the call with investors, Musk said Model S demand declined almost immediately following news of multiple Model S fires.

Screen Shot

Screen Shot

Source: Elon Musk Twitter account screen shots.

Yet, Tesla never had a fire problem, but rather a perception problem because of the media's role in hyping the fire incidents. As a result, Musk was quick to promote the safety of the Model S on his Twitter feed, Tesla's blog, and through interviews on major U.S. networks. "In the absence of social media, I'm not sure we'd have been able to correct the misperception," he said yesterday.

Screen Shot

Source: Elon Musk Twitter account screen shots.

While the National Highway Traffic Safety Administration, or NHTSA, is still investigating the Tesla fires, the company has made significant over-the-air updates to the Model S to quell safety concerns. Moreover, Musk is confident that the NHTSA will reach a positive outcome in its investigation. 

Get ready to pay for perks
Another thing investors may have missed from yesterday's earnings report is the fact that Tesla will begin charging drivers for its data connectivity services. In its latest shareholder letter, Tesla said, "New Model S customers will now receive free data connectivity and Internet radio for four years." Presumably, customers will need to pay for the use of Tesla's Slacker Radio and Internet connectivity services thereafter. 

This may come as a surprise to existing Model S customers, since up to this point they've been able to browse the Web on the go for free through the car's 17-inch touch screen. To be fair, Tesla was transparent about these changes and even said that for existing Tesla customers, the free four-year period would be effective beginning Jan. 1, 2014. In rare cases, Tesla said it would charge customers for extreme data use.

AT&T (NYSE:T) currently provides the wireless network chips used in Tesla's Model S. Per its agreement with AT&T, Tesla's electric car uses Evolved High-Speed Packet Access, or HSPA+, to create a Wi-Fi hotspot so that drivers can get real-time traffic alerts or use the car's touch screen to browse the Internet. Tesla's cars also receive wireless updates over the Internet, which allows the company to remotely fix bugs in the car's software.

This arrangement is also a win for AT&T. Contracts with automakers such as Tesla give the wireless carrier a new growth channel outside of mobile devices. As a result, it's likely AT&T will ink more deals in the connected car space in the year ahead. While specific details of Tesla's agreement with AT&T weren't disclosed, it's likely Tesla would take a percentage of the proceeds from future data plans purchased by Tesla drivers.

Ultimately, the most exciting takeaway for investors is the fact that Tesla's overall growth plans are on track. Tesla is set to launch its crossover SUV the Model X later this year, and Musk thinks Model X demand will actually exceed demand for its Model S. If that's the case, investors can expect another record year from the upstart automaker.

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Tamara Rutter owns shares of Tesla Motors. 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

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Jun 12, 2015 at 5:01PM

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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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