Tesla: Momentum stock of the year finally disappoints
Not even promises of its first deliveries to the Chinese market suffice as a weaker-than-expected outlook following Tesla's third-quarter earnings leads to a speculator stampede for the exits.
Is Wall Street's honeymoon with Tesla history?
All year long Tesla, the momentum stock of the year, has served as a touchstone of debate about the promise and the hype -- two sides of the same coin -- whenever the topic turns to alternative energy and electric vehicles. What with the stock up about 400 percent and the company's market cap soaring to around $21.5 billion as of Monday, Tesla's dazzling run-up also became a referendum on the 2013 bull market in tech.
Were we living through one of the biggest periods of value creation in memory or was this the mother of all euphoric stock bubbles? The electric car maker's latest financial report is not likely to settle that question but with markets trading near their highs for the year, Tesla's third quarter does offer a sober reminder about the risks of riding a tiger.
After the bell, Tesla reported numbers that while marginally better than analyst consensus expectations was not the barn-burner beat that many had expected. In the quarter, Tesla earned 12 cents per share, excluding items, compared with a loss of 92 cents a share in the year-earlier period. Sales were up more then ten-fold to $603 million from $50 million a year ago. Wall Street expected Tesla to post 11 cents per share on $535 million in sales, according to Thomson Reuters' analyst survey.
But the outlook disappointed, judging the immediate 10 percent selloff in the stock in after-hours trading. Tesla said that it planned to deliver "slightly under 6,000 Model S vehicles" during the current quarter. That would put its 2013 total for cars delivered at 21,500 vehicles. It also said that average selling prices would remain flat.
In its letter to shareholders, Tesla said it was making 550 cars each week and finished the quarter with just over 5,500 deliveries to customers. Tesla said it intended to increase production over the next several quarters "in order to keep up with the growth in demand" but wasn't more specific. It said that the company would deliver its first Model S orders to customers in China during the first quarter of the new year.
CEO Elon Musk, who has delighted in publicly tweaking people marking Tesla as an inviting stock short, has actually cautioned investors about Tesla's stock valuation.
"I actually think the value of Tesla right now is, the market is being very generous," he told CNBC. "And they're obviously giving us a lot of credit for future execution. So we'll do our best to honor the faith the market has placed in us."
He later sounded a similar theme in a conversation with a reporter from Bloomberg: "The stock price that we have is more than we have any right to deserve. We are going to do our best to fulfill the expectations of investors and in the long term the stock price will seem fair. I feel good that the company will achieve that value more in the long-term."
It was only happenstance, but Tesla reported its third-quarter earnings just a couple of days before Twitter's initial public offering.
On a conference call later in the afternoon, Musk said the company was working "really hard" to address existing production constraints, estimating that Tesla expected to alleviate the problem by next year.