Tesla Advances to Record on First Quarterly ProfitRose Kim and Craig Trudell
Tesla Motors Inc., the electric-car maker headed by billionaire Elon Musk, climbed to a record after saying it turned its first quarterly profit on higher-than-forecast sales of its controversial Model S sedan.
Tesla rose 16 percent to $43.93 at the close in New York. The stock has gained 30 percent this year, topping the 9.5 percent rise in the Standard & Poor’s 500 Index. Tesla’s previous closing high was $39.48 on Feb. 7.
Tesla’s profitability is a milestone for a company that has been at the center of debate over the future of electric cars. The Palo Alto, California-based company sold more Model S sedans than it had previously projected, as Musk, 41, led the defense against a New York Times story in February that questioned the car’s driving range.
“For Tesla to be in the black is a positive sign, and it’s a little bit surprising given the lukewarm reception we’ve seen with a lot of the other electric vehicles in the marketplace today,” Alec Gutierrez, an analyst with auto-market researcher Kelley Blue Book, said by telephone.
Tesla sold at least 250 more Model S sedans than the 4,500 units it had forecast in February. As a result, the company reached “full profitability” during the first quarter, according to a Tesla statement yesterday that didn’t specify the profit figure.
The average analyst estimate compiled by Bloomberg calls for a loss of 11 cents a share, excluding some items. Tesla hasn’t previously reported a quarterly profit in its three years as a public company.
“The progress on sales and profitability significantly reduces risk around TSLA’s cash flows, which have been a primary area of investor concern,” Elaine Kwei, an analyst at Jefferies Group, wrote today in a report. “We expect a high level of media attention over the next several days and correspondingly higher levels of activity in the stock,” wrote Kwei, who has a buy rating on the stock.
Tesla’s Model S has been at the center of disputes over the viability of electric cars that intensified following a Feb. 8 story in the New York Times. The article detailed a test drive between Washington and Boston that ended with a stalled Model S being loaded onto a tow truck.
Musk called the Times’ report “fake” and told Bloomberg Television that it trimmed Tesla’s stock-market value by as much as $100 million. The public editor for the newspaper said its reporter didn’t use good judgment and “left himself open to valid criticism.”
“All that publicity certainly didn’t hurt, and it might have helped,” Michelle Krebs, an analyst for Santa Monica, California-based auto researcher Edmunds.com, said by telephone. “They’ve got to sustain sales and profits every quarter. This is just a step along a path that’s going to be bumpy.”
Tesla said in yesterday’s statement that it will no longer produce the smallest battery option for Model S, citing lack of demand. The 40-kilowatt-hour version of the car contributed only 4 percent of orders for Model S, the company said.
Tesla said that its revised profitability forecast is separate from the “really exciting” announcement that Musk alluded to in a Twitter post last week. That disclosure will be made tomorrow and is “arguably more important,” Musk said in a separate message on Twitter.
Musk told analysts on a conference call in February that Tesla would like to begin to offer leasing in the second half of this year. Tomorrow’s announcement could be related to details of a Model S leasing program in the U.S., Ben Schuman, a Pacific Crest Securities analyst who rates the shares the equivalent of a hold, wrote today in a report.
Tesla said last month that it will repay by December 2017 the $465 million in U.S. Energy Department loans that it received to develop and build electric cars. The company’s fortunes are diverging from fellow loan recipient and electric-car maker Fisker Automotive Inc., which last week lost a potential automotive partner in China’s Dongfeng Motor Group Co. and furloughed employees.
Fisker, based in Anaheim, California, also hired restructuring lawyers from Kirkland & Ellis LLP, a person familiar with the matter said last week.
Tesla has forecast that deliveries of the battery-powered Model S will rise to a record 20,000 in 2013. The car starts at $59,900 and has a range of as far as 300 miles (483 kilometers) in ideal conditions when its 85-kilowatt-hour battery pack is fully charged. The original New York Times article detailed a test drive made in cold weather.