Tesla Update: Gigafactory Being Built, Profits Being Minted

Aug. 1.14 | About: Tesla Motors (TSLA)


Tesla earned 11 cents this quarter compared to analysts' estimates of 4 cents.

This does not change my viewpoint on the stock.

The stock is at the exact price it was at when I wrote my article on July 7th.

I explained why I thought that Teslas will eventually be allowed to be sold in all states in America; I said the stock was overvalued.

Tesla (NASDAQ:TSLA) and Panasonic announced a Gigafactory agreement. Preparation for the location of the Gigafactory started in June. Q2 Model S deliveries were 7,579 vehicles and production was 8,763 vehicles. Non-GAAP net income for this quarter was $16 million and 11 cents per share. GAAP net income was a loss of $62 million and a loss of 50 cents per share. The company is on pace for 35,000 deliveries this year. The annualized delivery rate for next year is projected to be 100,000.

Non-GAAP revenue was $858 million for the quarter, which is up 55% from last year. GAAP revenue was $769 million. Non-GAAP automotive gross margins were 26.8% and 26.9% on a GAAP basis. Non-GAAP automotive gross margins improved by 140 basis points from last quarter. The firm's outlook for production in the third quarter was 9,000 cars and for delivery of 7,800 cars. The company is transitioning its final assembly line to Fremont, so there will be a two week hiatus. The numbers without this delay would be 11,000 cars and 9,500 cars respectively. The company is increasing its guidance for investment by $100 million. The new guidance range is from $750 million to $950 million. The investments will go into creating new capacity, developing the Model S and Model X cars, building the Gigafactory, and increasing the footprint of the Supercharger.

The stock is at the same price it was at when I wrote the article "You Can't Sell A Tesla Here" a few weeks ago. The article outlined why the Tesla cars will eventually be allowed to be sold in all states in America. This is certainly a bullish argument. I held back on recommending the stock, however, because of valuation concerns. The company is truly an innovator. However, I think it is overvalued. Therefore, I rate it a hold until it has a correction. It is impressive that the stock has not had a huge decline after hours, since that has become the norm for Tesla in the past few earnings releases.

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