Why Tesla Motors, Dendreon, and Intercept Pharmaceuticals Tumbled Today

The stock market nixed hopes that it would rise to unprecedented highs on Thursday, but investors still fared relatively well, with the major market benchmarks delivering mixed results after giving up much larger gains earlier in the day. Yet certain stocks continued to face significant pressure to put up strong fundamental performance; on that score, Tesla Motors (NASDAQ: TSLA  ) , Dendreon (NASDAQOTH: DNDNQ  ) , and Intercept Pharmaceuticals (NASDAQ: ICPT  ) failed to deliver and were punished.

Source: Tesla Motors.

Tesla Motors fell 11% despite posting what many saw as strong first-quarter results. Revenue for the electric car-maker jumped more than 26% to $713 million, and adjusted earnings per share did better than investors had expected. Yet deliveries of Model S electric vehicles came in only marginally above Tesla's original quarterly forecast, and that disappointed investors who have become accustom to seeing Tesla crush its own past guidance in its actual report. Yet many things are going right at Tesla, as production rates climb steadily and make the company's goal of 35,000 deliveries for 2014 realistically achievable. Moreover, with its gigafactory battery-production facility starting to take shape, Tesla seems to be meeting all of its long-term goals even as its shares suffer a short-term bump in the road.

Source: Steven Depolo, Flickr.

Dendreon dropped 13% after the biotech producer of prostate cancer drug Provenge reported fresh quarterly results. Revenue climbed less than 2%, and even though Dendreon managed to cut its year-ago loss in half, Provenge sales have had to fight just to stay stable in the face of competition from rivals. Although cost-cutting moves have helped improve Dendreon's bottom line, the secret to long-term success lies with Provenge, and few investors believe the drug has much upside left. That could bode ill for the future prospects for Dendreon's stock, and several analysts followed up the company's report with downgrades.

Intercept Pharmaceuticals declined 13%, also in response to its earnings release last night. The biotech's net loss soared from the year-ago level due almost exclusively to the repricing of stock warrants, but rising research and development expenses also took a toll on profitability. Yet with all warrants having been converted into stock, Intercept Pharmaceuticals should have recorded its last noncash charge connected to the securities. With enough cash to fund operations until 2016, Intercept Pharmaceuticals is in a good position to let its treatments do the talking without fear of needing dilutive financing. The big question is whether its development-stage liver-disease treatments will make it through clinical testing and prove themselves as FDA-approved drugs at some point in the future. Although Intercept Pharmaceuticals has plenty of potential, investors still have to look critically at the company after its recent share-price surge.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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