What to Look for in Tesla Motors Inc.'s First-Quarter Results Today


Tesla's Model S charging. Source: Tesla Motors.

Tesla Motors (NASDAQ: TSLA  ) investors have been along for a wild ride over the last year while its stock has been one of the hottest stories on Wall Street. Tesla shares traded at $55.51 just a year ago, rocketing toward $200 only five months later. The shares subsequently topped $250 before settling back down near $200 over the last two months. I won't even try to guess how Tesla's shares will respond to its first-quarter results, being announced today after market close, but here are some key factors to look for.

Night and day
Just as wild as Tesla's stock price roller-coaster ride is the difference in the company itself between last year's first quarter and this year.

The electric-car maker recorded $68 million in last year's first quarter from zero-emission-vehicle credits that it sold to other automakers. Without those credits, Tesla's automotive gross margin in the first quarter of 2013 was 5%.

Fast-forward to today, the company isn't expected to record any profit from ZEVs and will deliver many more cars at much higher margins. Tesla is expected to post an automotive gross margin around 25% this quarter, and that margin is projected to reach 28% for the full year.

With the company so different from last year, it can be more difficult for investors to balance long-term visions with the short-term metrics that Wall Street seems to emphasize. So here are some of the numbers Wall Street is expecting, as well as the bigger picture for long-term investors.

By the numbers
Analysts surveyed by Bloomberg expect Tesla's revenue to reach a best-ever $704.5 million in the quarter, which would be a 25% improvement from the year-ago level. Analysts anticipate Tesla will report a net first-quarter loss of roughly $25 million, or $0.15 per share. However, excluding some one-time items Tesla is expected to post earnings of $0.07 per share for the quarter. Considering that Tesla is in the early pages of its potential long-term business story, there are many more important figures to look at than earnings per share.

Assembly line for Tesla's Model S. Source: Tesla Motors

Production and deliveries
Deliveries will rise over last year's first quarter but will almost certainly fail to top the record of 6,892 vehicles set in the fourth quarter of 2013. Tesla's guidance was for deliveries to reach 6,400 in the first quarter; however, it should be noted Tesla often underpromises and overdelivers.

The reason behind a drop in quarterly deliveries is that sales in China didn't start until last month -- the company is floating 1,000 cars toward China as I write this. As Tesla's deliveries continue to be supply-limited, that's essentially 1,000 deliveries that will be pushed from the first quarter into later quarters.


Graph by author. Projections based on first-quarter and full-year guidance.

Production of Tesla vehicles today is just as important as delivery figures. Tesla expects to deliver 35,000 Model S vehicles this year, which is a lofty 55% increase over last year. In the fourth quarter of 2013, production reached 600 vehicles a week; Tesla expects to reach 1,000 cars per week by the end of this year. I'd like to see Tesla report a production rate of at least 700 in the first quarter.

Model X
Also key will be details regarding its Model X. Tesla's SUV could be an even bigger portion of future company sales than the Model S sedan. That's an exciting prospect, as deliveries are expected next year, but the beginning of Model X sales is also coming later than initially planned.

Details regarding how far along Tesla is in completing the Model X and beginning production will be among the most anticipated comments from management in the first-quarter conference call. Tesla expects to have production design prototypes on the road by the end of this year. The speed at which analysts can predict Model X sales before it hits the market will have a direct effect on company growth estimates and how the stock is traded in the short term.

Investors should also look to Tesla's operating expenses in the first quarter. The company forecasted that operating expenses would rise 15% in the quarter as research as development for the Model X accelerated; if expenses balloon far past 15%, it could be a red flag signaling things aren't as on track as investors would hope.

Investors will also be all ears for any new information regarding the battery Gigafactory. Management explained during the last quarterly call that Tesla's Gigafactory and the Model X would proceed nearly in unison. It's obviously a hugely important part of Tesla's business plan -- the factory would reduce battery-pack costs by at least 30%. I don't expect to hear anything groundbreaking on this topic, but any additional information about the factory location or potential partners would be welcome news for investors.

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Read/Post Comments (6) | Recommend This Article (3)

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  • Report this Comment On May 07, 2014, at 5:30 PM, damilkman wrote:

    It seems like all of the gross operating profit is composed of adds from the base cost. My understanding is despite a starting price of 70K most units are being sold for 100K. Like soda or coffee the extra features is where automakers, especially luxury automakers make there margin. The big question is can the margin be retained when TSLA introduces a lower priced car that is affordable to the masses.

    Just to give an idea of scale, my Chevy Colorado cost 28K and was about 33K before all the rebates. That is equal to the entire addition of the average Model S customer.

  • Report this Comment On May 07, 2014, at 6:39 PM, TMFTwoCoins wrote:

    I'm sure a chunk of the gross margin is from premium options, but when you look at how quickly gaap margins have improved at Tesla it's clear it's not all from those premium add ons. I'm sure those add-ons over the last twelve months have remained steady, yet Tesla's gross margin has improved 2,000 basis points ,from roughly 5% to 25.4%. That, in my opinion, shows the company is doing a great job of streamlining production and reducing costs.

    On that note, I'm sure margins will be squeezed on the more affordable model, that's part of doing business to the masses. However, with the gigafactory reducing battery pack costs by 30%, that's a lot of margin improvement that isn't available today.

    It'll be interesting to see how it plays out.

  • Report this Comment On May 07, 2014, at 9:19 PM, joeinslw wrote:

    I understand that Tesla's report was 12 cents a share, and the street expected 10 cents, I have to admit it wasn't great, or as good as the last time when it came out to14 cents, but it was better than expected.....

    So did it seem that there was a panic after the market closed, or will the stock get the almost always bounce in the morning, and before we know it the price will be right back where it was? Could happen couldn't it, but many of you don't believe do ya?

    I have had faith in Tesla ever since it crossed 34.00 and I feel that one day we will all be driving an EV and we will be wondering what took so long, because it is the answer with so many of our problems.

    If you have been watching the strange destructive weather patterns we are experiencing throughout the World, and the main culprit is C02, and we need to stop burning fossil fuels, as many of you know Tesla does not make a car that burns fossil fuels, it builds Superchargers that gets it's energy from the Sun during the day, stores that energy in batteries, and when you plug in at a charging station, that energy it transferred to the batteries in your Tesla model car, a truly green car.

    If we can produce that kind of technology now in an automobile, in the future it can and will get better, that is the hope I have for the World, that is the hope I have for Tesla.

  • Report this Comment On May 08, 2014, at 9:20 AM, TMFTwoCoins wrote:

    @joeinslw

    Good question, I don't believe it was panic. One thing I've been explaining to people is that while Tesla beat estimates excluding one-time items, i.e. the $0.12 per share, it actually came in quite a bit below estimates for GAAP standards. Off the top of my head I believe GAAP estimates were for a loss of $0.25 and Tesla came in with a loss of $0.40? So, that definitely played a roll in the sell off.

    Not to mention that, despite Tesla's massive potential as you pointed out, it's already valued at almost half of General Motors and roughly 40% of Ford, the latter of which just posted one of its most profitable year's in 2013 with $8.6 billion pre-tax profits.

    I just think there was no way for Tesla to deliver such an amazing quarter to sustain its lofty price tag. That doesn't mean that those who have been invested for months can't still have an amazing investment, those folks will just have to wait long term and have patience during sell-offs like this.

  • Report this Comment On May 08, 2014, at 9:24 AM, TMFTwoCoins wrote:

    Why I bother to say figures "off the top of my head" and then immediately go look it up after I post the comment is silly. But after checking, GAAP estimates were for a loss of $25 million, or $0.15 per share, and Tesla checked in at a loss of $50 million.

  • Report this Comment On May 12, 2014, at 3:44 PM, stevebry56 wrote:

    Tesla will start work next month in one site and the month after buying insurance against some sort of showstopper that delays http://goo.gl/YiBOJn

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