As I write this, Tesla (TSLA) just reported Q1 2013 earnings. These were well ahead of expectations both for revenues ($562 million versus $492 million expected) and for earnings ($0.13 non-GAAP EPS versus $0.04 expected). Additionally, Tesla increased its full-year expected deliveries to 21,000 from 20,000.
Based on all this positive news, Tesla is obviously soaring in the after-hours session, trading at around $71 now, from the $55.79 close. And yet, I expect the stock to lose this happiness.
Why do I expect Tesla to fade away these gains? Because of a single reason: Tesla is a growth stock, and as I predicted, Tesla's growth is plateauing.
There are at least three clues for me to say this:
First, Tesla predicted 4,500 U.S. deliveries for Q2 2013. This is down from more than 4,900 delivered in Q1 2013. Although Tesla is putting this down to units being sent to Europe (but not yet recognized in the quarter), it's clearly weird that with Tesla having expanded production, it still won't be able to exceed the U.S. deliveries from Q1. This points towards U.S. demand having plateaued already;
Second, Tesla did not recognize the full deliveries during Q1 2013, as it states in its PR. This means that the Q2 lower delivery number is even more relevant as it will include some deliveries not recognized in Q1;
Third, Tesla stopped giving information on reservations. While Tesla indicates that it changed and simplified the reservation process, it seems quite obvious that giving no data at all is indicative that the data is no longer favorable. This, too, indicates plateauing demand.
Not a surprise
The model S is one year old. The early adopters have bought and now Tesla is reliant on a stream of more-mainstream buyers for a product that, while excellent, is still not mainstream. It's still a product which requires care in daily usage, and has well-publicized limitations. It's thus hard for it to exceed the demand gotten from the innovators, the early adopters. As a result, and as happened with the Roadster (though at much lower levels), demand plateaus early.
Tesla is seen as a growth stock. It losing the growth argument (and 4,500 deliveries for Q2 already puts it at or below Q1) is bound to have a huge impact on the shares. As such, I'd expect the stock to have great trouble in holding on to the gains. The stock is priced on growth, not earnings, so the earnings won't be enough to compensate the predicted slowing growth even in spite of the raised guidance for full-year deliveries.
Regarding full-year deliveries, one should understand that it's been a while that Tesla is speculated to be producing at 500 vehicles per week, which already implied deliveries well above 21,000, so the number doesn't impress.
I believe the early euphoria, also helped by further short covering, is going to fade as realization of the deep growth slowdown takes hold. The thesis that demand for the model S is plateauing gained a lot of currency with this earnings report, and that thesis is not conducive to further gains from here.
Also, I need to stress that I don't have any position in Tesla, because I think the wide following the stock carries is bound to bash me because of this negative interpretation of Tesla's earnings.