Tesla Earnings: Modest Outlook Fails to Charge Up Investors

Tesla Supercharger

Tesla Motors (NASDAQ:TSLA) closed the regular session up 1.03 percent at $177 on Tuesday, but fell as much as 10 percent in post-market trading after reporting third-quarter financial results that were not quite in line with analyst expectations. Total GAAP revenues increased 760.9 percent on the year to $431.4 million, while non-GAAP revenues (which include deferred revenue due to lease accounting) increased 1102.6 percent to $602.6 million, which compares against the mean analyst estimate of $534.6 million. Adjusted earnings increased from a loss of 92 cents per diluted share to a gain of 13 cents per diluted share, which compares against the mean analyst estimate of 12 cents.

Importantly, non-GAAP gross margin increased to 21 percent, up from 14 percent in the previous quarter. The gain ostensibly puts the electric vehicle maker on track to reach its 25 percent goal for the fourth quarter.

Tesla reported that it delivered a record 5,500 Model S vehicles in the quarter, and had increased production to 550 cars per week. Over 1,000 of the deliveries were made to European customers.

The “killer” from the report that had shares tanking in post-market trading was the outlook, which stated that Tesla expects fourth-quarter profits to be “about consistent” with third-quarter profits. Analysts were expecting earnings of 20 cents per share for the December quarter.

The post-market price action is not necessarily surprising. Absent unexpected incredible news from the company, shares were likely to sweat some value. Shares are up an incredible 456 percent year over year, and by most reasonable interpretations are overvalued.

On a GAAP basis, Tesla still lost money. The firm reported a net before-tax loss of $37.7 million, or 32 cents per share. This is down from a net loss of $110.8 million, or $1.05 per share, in the year-ago period, but still does little in and of itself to justify such enormous stock price growth.

The argument, really, is all about what Tesla could become. Tesla makes a good car, but not many of them. The company delivered 5,500 vehicles this quarter, while Ford (NYSE:F) sold 191,985 in October alone. Tesla still has a long, dramatic ramp up ahead of it if it is to realize even modest mass-market ambitions.

Full-year 2013 deliveries are expected at 21,500, with “slightly under” 6,000 expected to be delivered in the fourth quarter.