On Jul 2, 2014, we issued an updated research report on
Tesla Motors, Inc.
). The electric carmaker remains a loss-making company despite
increasing sales. In the first quarter of 2014, it reported
adjusted loss (including stock-based compensation expenses) of 14
cents per share, deteriorating from break-even results recorded in
the year-ago quarter. This resulted in a 60% negative earnings
surprise in the quarter.
Notably, the company is facing supply chain problems, which are
restricting its ability to increase production. Other factors
affecting the company's results are high research and development
(R&D) and selling, general and administrative (SG&A)
expenses, as it is investing significantly to develop the Model X
and expand its supercharger network. Tesla is also facing
opposition to its direct-selling model in some U.S. states, which
might lower sales volumes.
Tesla's limited market share, small operating scale compared to
other automakers, focus on a niche product segment and uncertainty
related to demand in the long term also resulted in a "B-" credit
rating from Standard & Poor's Ratings Services (S&P) in May
2014. The rating falls in the junk category.
Nevertheless, Tesla has acquired substantial market share in the
electric car market. Moreover, to boost sales, the automaker is
actively undertaking international expansion, particularly in
Europe and China. To deal with the shortage of lithium-ion
batteries, Tesla is building a Gigafactory to produce the batteries
in collaboration with various partners.
The Zacks Consensus Estimate for Tesla's 2014 earnings is
currently 8 cents per share, which translates into a negative
year-over-year growth rate of 52.9%. The company carries a Zacks
Rank #5 (Strong Sell).
Key Picks from the Sector
Other stocks worth considering in the same industry include
Fox Factory Holding Corp
Standard Motor Products Inc.
Douglas Dynamics, Inc.
). Fox Factory sports a Zacks Rank #1 (Strong Buy), while Standard
Motors and Douglas Dynamics have a Zacks Rank #2 (Buy).
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TESLA MOTORS (TSLA): Free Stock Analysis Report
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