Here’s What Sent Tesla’s Shares to Record Highs

Model X Tesla Motors

The month of May has seen many firsts for electric vehicle manufacturer Tesla (NASDAQ:TSLA). The company reported its first profitable quarter ever on May 8; Consumer Reports gave its Model S sedan a near-perfect score of 99 out of 100, noting that it may just be the best car ever, excluding the limitations of the vehicle’s battery life; and, on Tuesday, shares soared above $100 for the first time in Tesla’s 3-year history as a public company. The stock even traded as high as $104.31 per share, pushing the stock’s gains for the year to date to more than 200 percent.

As the company has proven it can make its vehicles profitable and produce them on a large scale, investors have grown increasingly confident. The most recent boost to Tesla’s stock price came as the company prepares to announce an expansion of the charger network for its electric vehicles this week.

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Chief Executive Officer Elon Musk said on May 20 that the network expansion announcement would be pushed back to this week, so that the news would come once the company had fully repaid its U.S. Energy Department loan. Tesla now owes the federal government nothing. On May 22, the company wired $451.8 million to the DOE, paying off the full amount borrowed plus interest nine years early thanks to the profitable quarter.

Tesla began installing solar-powered supercharger stations on major U.S. highways last year, enabling motorists to rapidly recharge the battery-powered Model S and extending the driving rage of the electric vehicle. Each $69,000 car can travel as far as 265 miles per charge. But as most charging states are currently in California, Musk has said that the company will enlarge the network of stations that allow a car to recharge in about 30 minutes.

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Contributing to the buzz surrounding Tesla was the field visit to Tesla’s manufacturing facility in Fremont, California by analysts from Goldman Sachs. Both the plant tour and their meeting with Musk highlighted that demand for the Model S remains strong. In North America, current order rates are running at approximately 20,000 units on an annualized basis, and the company believes it will end the year at a 23,000 to 25,000 annualized run rate, which will likely help the company increase its gross margin to 25 percent. The company highlighted several improvements in its manufacturing process that should also help drive margins above their current levels. These strategies included reduction in temporary workers, increased efficiencies and reduced scrappage, streamlining of operations leading to a reduction in full time employee man-hours, and a significant improvement in logistics costs.

The meeting also brought to light additional information regarding the battery performance of Tesla’s electric vehicles; as ValueWalk reported, the company believes that the cost per kilowatt-hour will decline to less than $100 over the next 10 years, a 75 percent reduction from current levels. Over the longer-term, Tesla is envisioning a technology that will lower the time spent recharging to be less than the time it takes to fill up the gas tank of a standard internal combustion vehicle.

Follow Meghan on Twitter @MFoley_WSCS

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