Tesla Charges Up on Model S Sales - Analyst Blog

Tesla Motors Inc. (TSLA) is so pleased with its better-than-expected sales of the Model S electric sedan that the company now expects to be fully profitable in the first quarter of the year, rather than the prior guidance of modestly profitable, excluding non-cash option and warrant expenses. The news sent the stock to 52-week high of $46.68 on Apr 1.

Sales of Model S in the first quarter were more than 4,750 units, exceeding the guidance of 4,500 units. The same Model S was the center of controversy in February following an article published in the New York Times. The article detailed the result of a test drive that raised many questions about the viability of electric cars such as Model S, but the report's validity was aggressively challenged by Tesla.

Initially, Tesla launched two all-electric models, Roadster and the Model S, with a price tag of $109,000 and $49,900, respectively. However, the company has phased out Roadster later due to its higher price tag and weak demand, and started relying solely on Model S to rejuvenate its market share. According to Environmental Protection Agency (EPA), Model S can travel up to 265 miles on a single charge of its 85-kilowatt-hour (kWh) battery pack.

In 2012, Tesla lost $396.2 million or $3.69 per share compared with $254.4 million or $2.53 per share in 2011. Due to a good start in 2013, the company now plans to repay its $465 million U.S. Department of Energy (DOE) loan much earlier and boost vehicle production to lower costs.

Tesla made its first DOE loan repayment of nearly $13 million in December last year while the second payment is due this month. The company expects the deliveries of Model S to go up to 20,000 this year.

Tesla also denied plans of producing Model S with a smaller battery pack (40 kWh) due to lack of demand, It will not be a viable option as well because consumers would not have the liberty to travel long distances. Instead, the company would provide a 60 kWh batter pack vehicle to the customers, which will have the improved acceleration and top speed of the bigger pack.

Tesla currently retains a Zacks Rank #3 (Hold). While we remain on the sidelines about Tesla, stocks from the same industry that warrant a look include Visteon Corp. (VC), Gentherm Incorporated (THRM) and Denso Corp. (DNZOY). All of them carry a Zacks Rank #1 (Strong Buy).

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