Tesla Motors (TSLA 0.38%) will release its quarterly report on Wednesday, and investors clearly have high hopes for the upstart automaker, having bid its stock above $200 for the first time last week. Yet even as Tesla has come of age in a strong environment for the industry, one big question facing the company is whether Ford (F 0.08%), General Motors (GM 0.02%), and other competitors automakers will catch up with it when it comes to innovation. Given Tesla's reputation as a forward-thinking car company, losing that innovative edge could prove disastrous.
The electric-vehicle maker inspires strong views from both bullish and bearish investors. Proponents argue that the company has been an industry disruptor, forcing Ford, GM, and the other large, established auto companies out of their comfort zones and into having to respond to ideas that could change major matters such as automotive customer service. Skeptics point to the miscues that have plagued Tesla, including vehicle fires that some believe could force the company to issue a costly recall. Let's take an early look at what's been happening with Tesla Motors over the past quarter and what we're likely to see in its report.
Stats on Tesla Motors
Analyst EPS Estimate
Change From Year-Ago Revenue
Earnings Beats in Past Four Quarters
Can Tesla earnings grow fast enough to keep investors happy?
In recent months, analysts have gotten more enthusiastic about Tesla earnings, raising their fourth-quarter estimates by a nickel per share and pushing up full-year-2014 projections by almost double that amount. The stock has responded quite favorably, climbing almost 40% since mid-November.
Tesla actually started off the quarter on a negative note, with its third-quarter-earnings report raising some questions about the sustainability of the company's growth. On its face, Tesla seemed to do well, with actual deliveries of 5,500 during the quarter representing accelerating growth on a sequential basis. Weekly production volume rose by about 10%, and gross margin continued to move upward. Yet investors apparently had higher hopes for the company, starting a drop in its stock price that would end up costing Tesla a third of its market capitalization at its worst levels in November.
Of grave concern to investors has been a string of fires involving Tesla's battery systems in its Model S sedan. The incidents have produced bad publicity and led to rumors that the company might have to issue a recall, even though CEO Elon Musk has noted emphatically that the rate of fires in Tesla vehicles has been relatively small compared to how many car fires internal-combustion vehicles produce. Nevertheless, with every new incident raising a media frenzy, Tesla has to accept that its cars will be under the microscope because of the company's success.
One key aspect of Tesla's future is the ability to export its success abroad. With Musk saying China could become the company's biggest market in the long run, Tesla could soar if it can start taking greater advantage of the luxury-car opportunity in this emerging market. Tesla has ambitious plans to get a third of its global sales from China this year, and taking its vehicles to other key foreign markets will be essential to maximize growth.
Tesla's good fortune has raised speculation about whether Ford or General Motors might move to acquire the company. With federal guidelines for fuel efficiency slated to rise in the next several years, an acquisition would give Ford or GM a leg up on compliance, as well as a shot in the arm in their respective hybrid and electric-vehicle sales, which haven't taken off in the same way that Tesla's have.
In the Tesla earnings report, watch to make sure that the company ends up exceeding its previous guidance of about 6,900 Model S deliveries for the quarter. With much of the stock's recent jump pegged to better than expected performance from its preliminary results, Tesla needs to keep delivering beyond investors' hopes if it wants to stay on an impressive growth trajectory. Kicking its growth into high gear could accelerate the stock's gains and make its recent performance look like just a small blip by comparison.
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