Tesla earnings beat the street, but shares tumble after hours

Electric carmaker reports $17 million in earnings and nearly 6,500 Model S deliveries, but that wasn't enough to satisfy investors.

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Tesla's Model S sedan. Tesla

Telsa released its first-quarter results on Wednesday that beat analysts' predictions, but it wasn't enough to impress investors, who pushed shares down in after-hours trading.

The electric carmaker reported adjusted earnings of $17 million, or 12 cents per share (excluding one-time items), which is at least 2 cents more per share than Wall Street analysts expected, according to Reuters.

Additionally, Tesla produced 7,535 Model S sedans and delivered 6,457 of the vehicles. The company's CEO Elon Musk said in a letter to shareholders (PDF) that he expects 7,500 more deliveries in the second quarter and a total of 35,000 for the year, which is up 55 percent from 2013.

This comes on top of the company investing nearly $2 billion in an upcoming "gigafactory" designed to produce more affordable lithium-ion batteries for its cars.

"We are expanding our factory capacity to support increased Model S production later this year and the introduction of Model X next year," Musk wrote. "Extensive development work on Model X is underway and we expect to have production design prototypes ready in Q4. Meanwhile, we are opening new stores, service centers and Superchargers at a faster rate, and later this year we will kick off construction of the Gigafactory. 2014 is already a very busy year."

During the final quarter of 2103, Tesla also reported stellar earnings with revenue at $610.9 million, up from $294.4 million a year ago.

But even with what seems like good news, the company's stocks took a tumble on Wednesday. During regular trading, Tesla's share price fell by $5.93, or 2.86 percent, to $201.35. And, in after hours trading, the shares fell even more. At the time of this writing, they're down $14.56, or 7.23 percent, to $186.84.

So, what gives? It's unclear. One reason for the lukewarm trading could be the hubbub around a handful of US states banning direct car sales. Tesla makes it a practice to sell its vehicles directly to customers, which some state officials believe could stymy competitive pricing.

"While consumers and the vast majority of jurisdictions have overwhelmingly welcomed our direct-sales model, there are still a few states in the US where we face resistance," Musk wrote in his letter to shareholders. "In those states, we continue to fight to protect our customers' ability to buy directly from Tesla. We believe strongly in the fairness of our position, which has been supported by a long list of consumer activists, economists and influential policy makers."

IG market analyst Chris Beauchamp suggests other possible reasons for the slump in after-hours trading, including weak battery production and higher expectations on share prices.

"Some 'whisper' numbers suggested we'd see 14 cents, so this is one area of disappointment, but another is that battery production appeared to be weaker," Beauchamp told CNET. "Tesla's stock performance has been built on high expectations (it trades on a forward earnings multiple of c. 97), so just doing well isn't enough. It needs to grow massively to justify the valuation given to it by the market. On today's news, that valuation still doesn't look justified."

While Tesla's stocks were down a few percentage points on Wednesday, they're still up more than 30 percent from the beginning of this year and up 270 percent from a year ago.

Update, May 8 at 7:35 a.m. PT: Adds comment from IG market analyst Chris Beauchamp.

 

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