Tesla Motors, Inc. (TSLA) continues to trade around highs even as analysts cut estimates. The company recently predicted profits for Q1 2013, yet the average analyst still expects a small loss by the company. In fact, over the last week, the Q1 estimate has slightly dropped to a loss of $0.07.
The company is leading the charge to developing the electric vehicle market with several revolutionary Model S that has obtained numerous awards.
While the stock remains close to the highs at around $37, the analysts continue to drop the estimates for 2013. The company reported what appeared to be strong results for Q4, so why have the analysts gotten more negative on 2013 and 2014 results?
Q4 2012 Highlights
The company reported the following highlights for Q4:
- Achieved 20,000 annualized production rate.
- Record new Model S reservations.
- Model S unanimously named Motor Trend Car of the Year®.
- Q4 revenue increases sequentially by 500% to $306 million.
- Rapid growth of Model S sales and service network.
- First profit now expected Q1 2013 versus prior guidance of late 2013.
On all accounts, Tesla is making incredible strides as a company and as a leader in the electric vehicle sector. The company has dramatically ramped up production and now forecasts a small profit in the current quarter. What the company failed to highlight is that the Q4 results again missed estimates. More than anything, the pattern of missing estimates has probably made analysts reluctant to go along with company forecasts.
Interestingly, the outlook for 2013 includes limited production gains from where the company ended 2012. The delivery rate of around 20,000 vehicles suggests limited ramp in the current year. The company lost $75M during Q4, so without a meaningful increase in production, the increased operating efficiencies can only take profits so far.
Earnings Estimates Plunging
While the company provided upbeat guidance regarding Q1, analysts continue to turn more negative on the next couple of years. As the following table shows, analysts don't believe the profit prediction and continue to downgrade estimates especially going forward.
The fact that 2014 earnings continue to plunge tells the ultimate story. Analysts originally expected $1.91 of earnings and that number is now down to only $1.31. Normally, a similar stock would trade down along with the declining numbers.
The stock remains very loved as it trades near all-time highs. The divergence between analysts' expectations and the stock price is interesting. Tesla has now been public nearly 3 years and the longs have done well, but the below chart suggests either a topping formation or a breakout to new highs:
As highlighted (see When Will The Tesla Investment Unravel?) back in December, the stock remains so beloved by investors that it is impossible to short. In the face of declining earnings estimates, the stock continues to trade at highs.
Musk has developed several incredible companies, yet profits remain in doubt. At some point, investors won't give the company or the genius CEO a pass. Ultimately, the stock will react to the earnings trend that is decidedly negative.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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