Tesla: Before And After The Model S

| About: Tesla Motors (TSLA)


Tesla’s Q1 2013 earnings report showed an 83% increase in sales compared to the previous quarter, clocking in at $562 million.

In the last quarter of 2012, revenue increased sequentially by 500%, as Tesla's revenue hit $306 million, and as the company moved from the Roadster to the Model S.

Investors should look to the Model X, expansion of Supercharging Stations, and the Gigafactory as catalysts for growth.

With the Model X in the pipeline, and the company's reputation under "fire" again, investors might feel the need for a recap of what the Model S did for Tesla (NASDAQ:TSLA)

Back When Tesla Didn't Turn a lot of Heads

For much of its four-year life, Tesla's stock was priced at a humble sub-$50. The company's first vehicle, the Roadster came and went, and not many in the stock market batted an eye (no offense to Roadster owners, but that's the truth). The company's fortunes turned somewhere mid-2013 for initially unclear reasons. Since the start of the year, the stock - then priced at $33.20 - nearly doubled in price by the first week of May of 2013, closing then at $59.50. After seven days, by the end of the second week of May, the stock's price had reached $87.80 - a remarkable rise of $28.30, or 47.6%. In October that year, the stock price had swelled to as much as $193.00, its highest value up until then. The investors' sudden increase in interest was gradually comprehended with the help of analysts like CNBC's Jim Cramer. Cramer believed that investors were possibly responding to Tesla's Q1 2013 earnings report that showed an 83% increase in sales compared to the previous quarter, clocking in at $562 million.

The Model S

The company's second offering, the five-door sedan, Model S was introduced in June 2012. In the first quarter after the arrival of the Model S, Tesla managed to sell 250 vehicles, posted an 88% percent sequential increase in revenue taking the figure to $50 million, yet gross margin remained negative for the company at -17%. In the last quarter of 2012, revenue increased sequentially by a whopping 500%, taking the figure to as much as $306 million. The Model S was already working wonders for the company's revenue, but there wasn't much response by the investors, possibly because despite immense growth in revenue, gross margin was still too low (8%) to register with the stockholders, and profits continued to be nonexistent.

But, by the arrival of the first quarter of 2013, Tesla really started making money. Model S sales hit thousands because of the introduction and success of the 60kWh version. The company's sales exceeded its expected number of Model S vehicles sold by approximately 400 units, with its expectations settled at 4500. It also generated a record $562 million from sales, which was again 83% more than the preceding quarter. Most importantly, however, this was the first quarter in which Tesla Motors recorded profits, worth $15 million, which was a lot for a company running on loans. There could be little doubt that the Model S' increasing sales, which have been helped by the inception of the Supercharger network in September 2012, is largely, if not solely, responsible for Tesla's improvement in top line growth and the stock's monumental growth.

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Source: InsideEVs U.S. Electric Vehicle and Hyrbid Unit Sales

Tesla sold 1,800 Model S vehicles during the month of June, which was an 800 unit increase from May. Tesla has sold 7,400 units year to date.

Tesla Would Hope that Model X Could Repeat Model S' Success

With increasing question marks being placed over the Gigafactory's finances, and fresh fires tarnishing the company's reputation, Tesla Motors is in need of a Model S-esque savior. July's car crashes resulted in the company's stock price to drop from $242.53 on July 1 to $218.72 at the close of July 8, causing it to lose over $2.5 billion in market capitalization - all in a week. Despite analysts' rating of "overweight," and Tesla's aggressive expansion of the Supercharger network to lure more customers, investors' sentiment is clearly not with Tesla and Elon Musk. The company should look to issue statements over the recent crashes as soon as possible and speed things up on the Gigafactory in order to regain investors' confidence, and subsequently look to impress consumers - and generate sales - yet again with their upcoming CUV, the Model X. Pre-orders look very strong for the Model X. In March, it was reported that over 12,000 units have been ordered, which requires a $5,000 down payment.

Source: ValueWalk Model X Pre-Orders

Should it fail to achieve these tasks, all that Tesla Motors gained over the past year could be lost as quickly as it came. As they say: easy come, easy go. Elon Musk and Tesla's stockholders would hope that's not the case with their beloved EV maker.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.