On Friday May 10, 2013, Tesla Motors (TSLA) stock price closed on the Nasdaq stock market exchange at $76.76, up $7.36, 10.61% for the day. This also marked a new 52-week closing high on the stock market. Friday saw an intra-day high stock market price of $81.00. On March 28, 2013 TSLA closed the stock market trading day at $37.89. This reflects an astounding run-up of the price on the stock market of 102% in six weeks. This number is significantly better than the stock market as a whole. For the same time period, the Nasdaq stock market composite index showed an increase of 5.17%. This is reminiscent of Google (GOOG) when they had a 20.00% one day stock market price increase upon the release of their Q1 2008 earnings. For the same six week time period of March 28, 2013 to May 10, 2013, the Google stock market price was up 10.8%.
Who is Tesla Motors?
Besides currently being the darling of the stock market, Tesla Motors is a Silicon Valley electric car and electric powertrain designer and manufacturer. Tesla Motors is named after Serbian-American electrical engineer, physicist, and inventor Nikola Tesla. The company’s first vehicle and the first fully-electric sports car, the Tesla Roadster, uses an AC motor derived directly from a Tesla design. The Tesla Roadster has a base price of US$109,000. Tesla began selling the Roadster in 2008 and in 2012 introduced the Model S to the automobile-buying market. Tesla Motor stock was first traded on the Nasdaq stock market on June 29, 2010. Some would say that Tesla Motors is Elon Musk, the company’s forty-one-year-old co-founder, Chairman, CEO, and Product Architect. Musk is also a co-founder of PayPal.
Funding and Start Up Of Tesla Motors
Two separate teams, one with Musk as a member, in 2003 were attempting to commercialize a prototype electric sports car created by AC Propulsion. The president of AC Propulsion suggested that the two teams join forces and they did, naming Musk as the chairman and head of design. In addition to his functional roles, Musk was the primary investor in Tesla and funded the majority of Series A capital with personal funds. From the start, Musk has always insisted on the company producing an affordable electric vehicle that would appeal to both the mass market and the stock market. Following additional rounds of equity financing, in June 2009 Tesla received debt financing of $465 million in interest-bearing loans from the US Department of Energy. Tesla used the funds to support engineering and the production of the Model S and to develop the electric powertrain that it now sells to other automakers. The cheap debt financing was viewed favorably by the stock market.
Why the Friday run-up?
There is a theory that the stock market price saw such a rise on Friday because speculators who had shorted the stock in anticipation of a price decline had to buy on the open stock market. Investors have a short interest in 41 percent of the Tesla public shares. Also, on Wednesday of last week, the company issued its financial results for the first quarter ending March 31 and announced a quarterly profit for the first time in the company’s 10-year history, which was good news for the stock market. Other news in the first quarter earnings press release that impressed the stock market were a cash balance increase, record sales for the quarter, a doubling of the gross margin over the prior quarter, and a forecasted increase in both domestic and global demand. Furthermore, the stock market reacted to Consumer Reports magazine reporting that Tesla’s Model S sedan, with a base price of $69,900, scored 99 out of 100 points in its evaluation.
Tesla’s Financial Numbers
Tesla Motor’s Q1 2013 revenue was reported to the stock market as $562 million, up 83% from Q4 2012. Higher Model S production rates, improved Q1 total gross margin from 8% to 17%. With their products selling like hot cakes, they impressed the stock market even more by selling zero emission vehicle credits to less green automakers. This added an additional 12% to Tesla Q1 revenues, a move pleasing to the stock market. The bad news in the Q1 earnings press release was the increased costs associated with the switch over from (and increased unit production by over 3000%) the Roadster to the Model S. Selling, general and administrative which were up slightly over Q4. The stock market did not have a negative reaction to this news. The company presented the stock market with a bottom line GAAP net income of $11.2 million ($.10 EPS, $0.00 EPS diluted). Cash on the balance sheet at the end of Q1 was $231 million.
Tesla Motors keeps reporting news that the stock market wants to hear. The company plans to continue supplying electric powertrains and battery packs to Toyota for their RAV4 EV program. They have stated to investors and the stock market that they will hit a gross margin of 25% in Q4 2013. One of Tesla’s strategic corporate goals, that is sure to please the stock market, is to increase the variety and number to electronic vehicles to the mainstream market. They plan to do this by selling through their own company-owned display rooms and online, selling electric powertrain component to other manufacturers, and acting as a stimulant to other automakers as a good example. The stock market is sure to respond favorably as Tesla continues its winning ways.
In the pipeline
On February 9, 2012 Tesla Motors announced to the stock market the new Model X. The vehicle has been delayed until 2014. The company announced the delay in order to focus on profitability and meet 2013 Model S production targets. That is good news for the investors and the stock market. Tesla is also in the process of designing electric minivans, SUV crossovers, and electric fleet vans. On the sportier side, the company is also planning the BlueStar model which will have a starting price of $30,000. As a vehicle targeted to the mass-market, the sales that it generates are sure to be appreciated by the stock market. Also in Tesla’s crystal ball is a self-driving car.