Has Tesla run out of charge?

Another earnings report, another mix of numbers that only add to the confusing picture surrounding Tesla.

The only certainty, it seems, is that the jury is still most definitely out on the electric vehicle pioneer. Investors have once again been left to decide which of the takeaways from this release is most compelling, and take action accordingly.

It does appear that the days of stellar growth are behind Tesla – at least until Elon Musk can prove that his company is capable of delivering enough vehicles to compete with the established names that currently dominate motoring. The company began 2014 worth an impressive $150 per share, more than 300% higher than 12 months previously. Growth did continue in 2014 – including a record high of $285 per share in September – but it was markedly slower, with just a 48% increase over the 12 months.

That’s no poor performance by any means: the NASDAQ grew just 18% in the same period. It does signal an end to the stunning form of previous years, though; and so far 2015 has been much worse.

Tesla lost 7% of its share value in January, and while it climbed back to parity ahead of its earnings call on February 11, the muddy set of figures sent it straight back down. The day after earnings hit markets, shares dropped below the $200 mark once again.

Why the turnaround in fortunes? Firstly, Tesla’s top line figures were a pretty hefty disappointment. Revenue came in $120 million under expectations, and earnings per share was a dramatic $-0.13 against an anticipated $0.316. Mr. Musk has previously made it clear that he does not expect any profit from the business before 2020, but to miss analysts’ predictions so starkly is a problem.

Unlike some other growth businesses, Tesla at the moment has a clear, simple business model based around just one car: the Tesla Model S. And it’s the deliveries of that car that have investors worried.

After initially predicting 35,000 deliveries for 2014, Tesla issued guidance in November that a revised figure of 33,000 cars would be distributed to customers. That required some 11,000 shipments to be successfully completed last quarter. Mr. Musk’s silence on the total number of delivered Tesla’s was deafening: but with just 9,834 shipments made in the quarter it was clear his company had fallen short.

Those aren’t the only problems that Tesla is facing, either. Chinese sales appear to be weak, with a leaked memo published by Reuters hinting that just 120 cars had been delivered to the country. Mr. Musk played down the problems his company was facing in Asia, but did admit that it hadn’t ‘executed super well’.

Add to that some grumblings from investors about Mr. Musk apparently appearing to be more interested in his other enterprise, SpaceX, than Tesla, and a complete picture of why the company’s share price is struggling becomes clear.

Is a recharge on its way?

Investors may be voicing discontent, but brokers are still broadly behind Tesla. Of the 19 brokers who have ratings on Tesla stock, four recommend a strong buy, nine a buy and just one a sell.  There is, it seems, a fair amount of solace behind the headline negativity.

Tesla’s problems with deliveries appear unrelated to demand (in the US at least) or production last quarter. Rather, the company has placed blame on missed deliveries and shipping problems, announcing that its production target had been hit. The company’s expectation is to sell 55,000 cars this year, a marked improvement.

Perhaps most importantly, a sister vehicle to the Model S, the X SUV, is still apparently on target for a mid-2015 launch. That should be a big growth driver in the coming years, and with a few missed targets and deadlines over the years it is vital that Mr. Musk delivers this time around.

It may well be the case that Tesla’s recent travails have been a normal part of a company transitioning from small, exciting prospect to established car manufacturer.

It definitely has some way to go before matching its competitors in car manufacturing. The business is worth roughly half as much as Honda, for instance, despite its projected 55,000 car sales remaining some way off the 1.5 million figure achieved by Honda last year. Toyota, the current market leader, sold over 10 million models last year and is worth around ten times as Tesla.

Mr. Musk hopes that an entry level model will allow Tesla to achieve sales of half a million per year by the end of this decade. That’s certainly sky-high thinking: but investors will be hoping he keeps his interests down to earth to see Tesla fulfil its full potential.

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