Bloomberg News

Tesla Surges After Posting Profit; Value Exceeds Fiat’s

May 09, 2013

Tesla First Profit Tops Estimates on Rising Model S Sales

First-quarter net income totaled $11.2 million from a loss of $89.9 million a year earlier, Palo Alto, California-based Tesla said in a statement on its website yesterday. Photographer: Patrick T. Fallon/Bloomberg

Tesla Motors Inc. (TSLA), the maker of electric cars run by billionaire Elon Musk, surged 24 percent after posting a first profit, beating estimates and earning a top evaluation for its Model S sedan from Consumer Reports.

Tesla reached $69.40 at the close in New York. Its market capitalization totaled $8 billion, exceeding the $7.8 billion for Turin, Italy-based Fiat SpA (F), the majority owner of Chrysler Group LLC.

First-quarter net income totaled $11.2 million from a loss of $89.9 million a year earlier, Palo Alto, California-based Tesla said in a statement on its website yesterday. Excluding some items, the profit was 12 cents a share, compared with a year-earlier loss of 76 cents. The average estimate of 10 analysts surveyed by Bloomberg was for a profit of 4 cents.

“The stock is trading like it’s 1999 and we’re in the Internet bubble again,” said Maryann Keller, principal at consulting firm Maryann Keller & Associates in Stamford, Connecticut. “It has nothing to do with Tesla’s fundamentals. It has to do with pie-in-the-sky aspirations that don’t reflect the realities of the auto industry.”

Tesla shares have more than doubled this year, compared with a 14 percent rise in the Russell 1000 Index.

‘Hat’s Off’

“My hat’s off to them,” Bill Ford, executive chairman of Ford Motor Co., said of Tesla today after his company’s annual meeting in Wilmington, Delaware.

“It’s really hard to start up a company, particularly in the auto business, and be successful,” said Ford, great-grandson of company founder Henry Ford. “We’ve seen many who have not, and so the fact that they are off to a really good start and doing well, I think, is a real tribute to them.”

Separately, the Model S received the highest rating from Consumer Reports as the luxury sedan scored 99 out of 100 points, the magazine said in an e-mailed statement.

Tesla said it sold 4,900 Model S sedans in the quarter. The company said March 31 deliveries of the car exceeded 4,750 in 2013’s first three months, better than a prior forecast of 4,500. Full-year Model S deliveries should total about 21,000 vehicles, up from an earlier 20,000-unit goal, the company said.

Fiat and Chrysler, both led by Chief Executive Officer Sergio Marchionne, delivered a combined 1.02 million cars and trucks in the first quarter. Revenue for the quarter totaled 19.8 billion euros ($26.1 billion).

Market Valuation

Tesla’s market valuation puts it in the lower ranks of the world’s automakers. In addition to Fiat, Tesla’s market valuation exceeds Paris-based PSA Peugeot Citroen’s $2.8 billion.

Tesla still lags behind Japan’s smaller automakers, including Mazda Motor Corp. (7261)’s $9.9 billion market valuation and the $15 billion for Fuji Heavy Industries Ltd. (7270), the maker of Subaru cars.

Tesla is dwarfed by Detroit-based General Motors Co. (GM:US) at about $44 billion and Ford at about $55 billion. The market valuation of Toyota Motor Corp. (7203), the world’s largest automaker by vehicle sales, is about $200 billion.

The profit and market capitalization are milestones for a company that has been at the center of the debate over the future of electric cars. CEO Musk led the company’s defense of the Model S against a New York Times story in February that questioned the car’s driving range in cold weather.

The Times story described a test-drive between Washington and Boston that ended with a stalled Model S being loaded on a tow truck. Musk called the report “fake” and told Bloomberg Television 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.”

Shorting Tesla

Currently, investors have a short interest in more than 45 percent of Tesla’s float, or shares available to the public, according to data compiled by Bloomberg. The shares had the seventh-highest short interest among Nasdaq-listed stocks as of the April 15 settlement date.

In a short sale, an investor who suspects a stock is poised to fall borrows shares and sells them, then buys stock later, presumably at a lower price.

“We’ve got a huge short position against us,” Musk said in a May 2 interview in Hawthorne, California. “It’s truly enormous and, I think crazy. We’re typically within the top five most shorted stocks on the entire market.”

‘Go Ballistic’

Musk said there are rumors some investors have a naked short position in Tesla. In a naked short sale, the seller doesn’t borrow shares at the beginning of the process and can get caught needing to buy at ever-higher prices.

“You’re not supposed to do that on the Nasdaq,” Musk said. “If there’s a naked short, oh my god, things could really go ballistic.”

Covering of short positions is “a big part of” Tesla’s gain today, said Elaine Kwei, an analyst at Jefferies Group who rates the shares a buy.

“This has been such a polarizing stock,” Kwei said. “There’s still much skepticism and doubt around electric vehicles, and a lot of people didn’t expect the company to get this far.”

Tesla Revenue

The company’s revenue surged to $561.8 million from $30.2 million in the year-earlier quarter, which was before Model S production began. Sales of so-called zero-emission vehicle credits to automakers Tesla didn’t name generated $68 million, or 12 percent of revenue, in the quarter. Revenue from such sales will drop in the second and third quarters and there may be none in the fourth quarter, Musk said on a conference call.

“I’d be lying if I said it wasn’t somewhat surprising to see they’ve been able to turn a profit so quickly” on the Model S, Alec Gutierrez, an industry analyst for Kelley Blue Book, said in a phone interview. “It has the right stuff to be a strong player in the industry,” said Gutierrez, who is based in Irvine, California.

Tesla had a loss from operations of $5.58 million, down from $88.8 million a year earlier.

Tesla ended the quarter as the top seller of rechargeable autos in North America. Its Model S deliveries exceeded the 4,421 sales of GM’s Chevrolet Volt plug-in hybrid and 3,695 deliveries of Nissan Motor Co.’s Leaf.

The company said yesterday that it expects annual global demand for its vehicles to exceed 30,000 units a year.

“We exceeded our own target for deliveries,” Musk and Chief Financial Officer Deepak Ahuja said in the statement. “2013 is off to a strong start.”

U.S. Loan

In March, Tesla sales representatives e-mailed some customers who hadn’t completed a Model S purchase to do so prior to the end of the quarter to help the company attain its first profit. Musk said the wording of the messages by “overzealous” staff wasn’t approved by the company. The company said yesterday it followed strict procedures for booking sales.

“Even if a car was received, fully paid for and signed off as good by a customer, we did not recognize the revenue if the paperwork was incorrect,” Musk and Ahuja said in the statement.

The company, which was awarded a $465 million Energy Department loan in 2009, said it made a principal payment “of almost $13 million” during the quarter. Musk has committed the company to repaying the loan within five years, half the original period.

Accelerating the loan repayments gave the company a one-time benefit during the quarter. Excluding that benefit, Tesla said it earned less than half a cent per share in the quarter.

Musk’s fortune has soared 89 percent this year to $4.5 billion, according to the Bloomberg Billionaires Index.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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