Tesla Motors, Inc.
) fell 17.2% to $146.35 on Nov 6, before recovering marginally to
close at $151.16. This is the largest one-day fall since Jan 2012
for this market-favorite stock, which surged 422% from $33.87 as
of Dec 31, 2012 to $176.81 as of Nov 5, 2013.
The slump in Tesla's stock resulted from disappointing third
quarter results, arising from production shortfall. The company
is facing a shortage of lithium-ion battery cells, which is
limiting its production capacity. Consequently, Tesla is unable
to meet the rising demand for its Model S.
Although the company has increased its production capacity to
550 cars per week and has delivered more than 5,500 cars during
the third quarter, which is a record for the carmaker, it is
still failing to meet demand. Consequently, the Palo Alto-based
automaker had to stop deliveries in North America to meet the
demand in Europe.
Tesla is working on overcoming this constraint. The electric
carmaker recently extended its supplier agreement with Panasonic,
whereby the latter will supply around 2 billion automotive grade
lithium-ion battery cells to Tesla over the next four years. This
is enough to produce around 300,000 cars. The company is also
considering opening a cell and battery giga factory to boost cell
However, demand is also expected to ramp up now that Tesla has
started taking reservations for Model S in China. The automaker
will start delivering the car in China from the first quarter of
Another factor affecting Tesla's results is high research and
development (R&D) and selling, general and administrative
(SG&A) expenses. The company is investing significantly for
developing Model X and the right-hand version of Model S, apart
from expanding its Supercharger network.
Tesla believes that R&D expenses will increase 25%
sequentially in the fourth quarter of 2013 due to increased
efforts on the development of Model X and Model S enhancements.
SG&A expenses are also projected to rise 20% due to increase
in retail locations, service centers and Supercharger
Nevertheless, Tesla logged a narrower adjusted loss (including
stock-based compensation expense) of 4 cents per share in the
third quarter of 2013, compared with $1.04 per share of loss
recorded in the year-ago quarter. Results compared unfavorably
with the Zacks Consensus Estimate of break-even results.
Third-quarter 2013 earnings exclude non-cash interest expense
related to convertible notes of 3 cents per share and deferred
gross profit for Model S due to lease accounting of 21 cents. On
the other hand, 2012 earnings exclude unfavorable change in fair
value of warrant liability of 1 penny per share. Including these
items, the company reported net loss of $38.5 million or 28 cents
per share compared with $110.8 million or $1.05 in the third
quarter of 2012.
Revenues, excluding Model S revenues deferred due to lease
accounting, jumped to $602.6 million in the quarter from $50.1
million a year ago, beating the Zacks Consensus Estimate of $553
million. Year-over-year improvement in revenues was driven by
higher vehicle deliveries and increase in average selling price
of the vehicles together with a better mix of cars.
Tesla currently retains a Zacks Rank #3 (Hold). Other major
automobile stocks worth considering are
Fox Factory Holding Corp.
General Motors Company
Ford Motor Co.
). While Ford is a Zacks Rank #1 (Strong Buy) stock, the other
two carry a Zacks Rank #2 (Buy).
FORD MOTOR CO (F): Free Stock Analysis Report
FOX FACTORY HLD (FOXF): Free Stock Analysis
GENERAL MOTORS (GM): Free Stock Analysis
TESLA MOTORS (TSLA): Free Stock Analysis
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