Tesla Meets Its Quotas and Offers Few Surprises in Its Second-Quarter

Tesla Model S, photographed in Switzerland by James Lipman // jameslipman.com

For Tesla Motors (NASDAQ:TSLA), the pieces are falling into place exactly how analysts expected them to be — and in-line, if not a little bit ahead, of where the company said things should be when it unveiled its quarterly results after the market bell on Thursday.

Tesla earned 11 cents a share in the quarter excluding certain costs, and its heavily anticipated initial deliveries to China began without a hitch and met analyst forecasts. Analyst opinions compiled by Bloomberg yielded estimates of just four cents, and best-ever quarterly deliveries of 7,579 Model S sedans fell in-line with expectations. That’s better than the 7,500 units that Tesla initially forecast, a number held back by supply constraints for the crucial lithium-ion battery cells that the cars demand.

The company is aiming to delivery 35,000 units this year, and is on track to meet that goal, or even exceed it. By the end of next year, the company — which will have added the Model X crossover vehicle to its portfolio by then — is eyeing 100,000 annual deliveries. To accomplish such a feat, Tesla will be dependent on the battery cell-producing Gigafactory, which it reportedly broke ground in Nevada on over the last quarter (though other sites are still under consideration.)

Baird & Co.’s Ben Kallo was all about 2015′s outlook when he spoke with Bloomberg, calling the projection the “biggest thing” in the results. Kallo rates Tesla the equivalent of a buy. “It’s an exciting next year at 100,000. This should override everything.” 

Historically, Tesla hasn’t had an issue with falling short of meeting its own projections, and the stock has actually suffered in the past because it didn’t beat analyst forecasts by enough. But more to the point, when Tesla says it will accomplish something, it generally does. In order to help ramp up production of its vehicles, Tesla has retained an agreement with Panasonic — the current producer of its cells — to help share the burden of the Gigafactory, which may one day employ as many as 6,500 people and cost some $5 billion.

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Overall, Tesla’s net loss widened to $61.9 million, or 5 cents a share, which fell against an estimate calling for a net loss of $41.2 million. Revenue, however, totaled $769.3 million for the quarter, excluding $88.2 million in deferred revenue for leased vehicles, and once adjusted for the lease accounting, revenue exceeded analysts’ estimates by 5.5 percent. This implies that Tesla is still experiencing meaningful sales growth, but spending trends to increase output have left erased any potential profits.

This is largely due to the company’s pledge to invest $750 million to $950 million this year, in capital spending and research and development, which represents a boost of $100 million more than the previously forecasted range. The ground breaking of the Gigafactory likely played a significant roll in this, as will retooling efforts to boost production and make room in the factory for the Model X.

“We’ve essentially completed the creating of the construction pad for the Gigafactory in Nevada,” Bloomberg quoted Musk as saying on said Thursday’s conference call. “We are going to be doing something similar in one or two other states, something I previously said we were going to do.” 

Once the Gigafactory is up and running — Musk added that Tesla’s stake in the facility will be about 40 to 50 percent — Tesla will be able to make good on its promise to have the Model 3 ready for its 2016 or 2017 debut. It’s expected to cost about half as much as the Model S at $35,000, and boast a 200 mile range.

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