Tesla (NASDAQ:TSLA) stock in dropping after reporting earnings due to poor production numbers. High flying stocks like Tesla must dazzle investors when reporting earnings. See this article and this article.
The Tesla car hit the market with a bang and continued to draw interest from consumers interested in advancing the concept of energy-efficient vehicles. The high price of the vehicles, up to $120,000, makes it currently a car for the select few in the 1% category. Tesla Motors understands this limitation on its sales and is working on the Gen II model, which is intended to bring electric car energy-efficiency to a broader market. Investors waited with considerable anticipation for the 3rd quarter earnings number released today.
Tesla reported its third quarter 2013 earnings at $.12 per share on $603 million in revenue, excluding the Zero Emission Vehicle credits. This beat Reuters estimates of $.11 per share on $534 million. The company reported the delivery of 5,500 Model S units during the quarter, which included over 1,000 units to Europe. The company hopes to increase its 4th quarter deliveries to 6,000, exceeding their 21,000-unit goal for the year. Even so, the stock dropped in after hours trading and may be under pressure tomorrow morning.
Though the earnings data is a significant number for most investors, a more important number may be the number of vehicles sold. Tesla has stated its intention to deliver more than 5,000 Model S vehicles in the third quarter. Many investors expect even higher numbers because this quarter will be the first time the company reports sales in Europe. The stock has risen 8 percent in anticipation of this quarter's announcement.
Tesla's outlook is a study in both positives and negatives. The Palo Alto company has a number of supply problems that have not been resolved to date. Increase in sales may not easily translate to an increase in shipped vehicles, creating a drag on achievable earnings. If the company has managed to deal with these supply issues, they would be in a position to take advantage of their aggressive marketing efforts of the Model S in Europe. CEO Elon Musk is no doubt working exactly on this outcome. Currently, Tesla is manufacturing 550 cars each week at its plant in Fremont.
Investors should take a cautious approach at Tesla's current stock price at this juncture and take some profits on a portion of their holdings.
Most of the increase in the TSLA stock price this year is based on expectations of the company's Gen II sales. Touted as their affordable electric car, the Gen II will have to prove its viability in the marketplace in future earnings periods. With little tangible evidence, investors could have some unpleasant surprises ahead if the vehicle garners any negative press stories in the months ahead. The best strategy is to allow the investment community to digest the current earnings report fully before making further acquisitions of the stock at this still elevated price level.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.