Tesla Motors Earnings Preview: Focus On Margins And Model S Sales

| About: Tesla, Inc. (TSLA)
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Tesla Motors (NASDAQ:TSLA) projected annual revenue in the range of $560-600 million at the start of 2012, but later revised it downward to $400-440 million, primarily due to a delay in the ramp up of Model S production. Tesla’s revenues stood at $106.9 million for the first nine months of 2012. However, now that Tesla has finally installed production capacity of 400 units a week (or about 20,000 units a year), we can expect the revenues to be significantly higher in the fourth quarter.

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Model S Creating Buzz

Tesla’s Model S has mostly received very positive reviews, and the car is seen as a cool, swanky and an environmentally friendly alternative to the traditional gas guzzlers. Tesla has already received 13,000 booking orders, and the automaker is expected to sell every car it produces this year. Assuming Tesla generates an average revenue of about $65,000 for each Model S sold, its revenues could very well exceed $1.3 billion in 2013.

Furthermore, to reduce any distance related anxiety, Tesla is in the process of establishing a network of ‘supercharger’ electric car recharging stations across the country. It has already set up a number of stations in California and the East Coast, and more of these will be set up in the coming quarters.

Tesla’s CEO, Elon Musk, says that he is highly confident of the company achieving gross margins of 25% in 2013. The automaker’s margins were negative last quarter, but they should see an improvement now that the Model S production has gained momentum. We will be keenly watching Telsa’s numbers since the result will provide a guidance of whether the company can achieve its intended target this year or not.

We currently have a Trefis price estimate of $36 for Tesla, which is in line with the current market price.

Disclosure: No positions.