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There's More to the Tesla Story

Michael Lewis
April 2, 2013

Tesla Motors (NASDAQ: TSLA) has delivered an in-your-face to its naysayers with the announcement that the coming quarter will be its first foray into profitability. With a full earnings release not due until May, we only know that the company sold more Model S sedans than it projected. That wasn't enough to deter Mr. Market, though, as the stock skyrocketed to all-time highs on the news. What do we know about the state of the company, other than its profitable first quarter? Is now the time to get in on this auto-industry disruptor?

Pump the brakes
Though the message will probably fall on deaf ears, investors shouldn't rush in to Tesla solely because it had a profitable quarter. Yes, the company is growing its sales every quarter and pumping out more of its limited model lineup, with a-sold out backlog going many months forward. The thing is, though, there are many ways to reach a bottom line that's in the black -- and they don't all signal continued profitability going forward.

We know the company has made and sold twice as many cars as it did a year ago in its first full quarter of production. But one of the biggest hurdles for the company is its weekly production. It needs to get the manufacturing process down to the point where it can sell its cars for more than it costs to make them -- you know, real profitability. We don't know if it has done this yet, and investors should be careful not to take this impressive, though ultimately inconclusive, piece of information too seriously.

Stop whining
Tesla permabulls will probably say I'm trying to dampen a cruci