Ahead of the Bell: Tesla shares tumble

Shares of Tesla Motors stall in pre-market trading after 3Q profit misses expectations

Associated Press

NEW YORK (AP) -- Shares of Tesla Motors Inc. dropped in pre-market trading Wednesday after the electric car maker reported disappointing third-quarter results.

The company announced after the market closed Tuesday that it sold about 5,500 Model S sedans in the quarter. That was a record for the Palo Alto, Calif.-based company but failed to rev the engines of some analysts who were looking for more. Barclays had predicted the company would deliver 5,820 cars.

CEO Elon Musk told analysts that production was held back by a tight supply of batteries, but that a recent agreement with Panasonic Corp. should boost shipments, and the company is considering building its own battery plant.

The shares slid $19.81, or 11.2 percent, to $157 before Wednesday's opening bell.

Shares closed at $176.81 Tuesday before the results were released. The stock has zoomed up more than 400 percent this year as Tesla turned a profit and won raves for the Model S, which starts at $70,000.

Tesla reported a third-quarter loss of $38.5 million, or 32 cents per share, on revenue of $431 million. Analysts had expected income of 8 cents per share on revenue of $547.5 million, according to FactSet.

Tesla said that using figures that don't conform with normal accounting principles it would have beaten expectations with earnings of 13 cents per share and revenue of $602.5 million. Those numbers give Tesla full credit for a lease up front, while the generally accepted accounting principles, or GAAP rules, require the money to be booked over the course of the lease.

Stifel analyst James Albertine said the adjusted numbers still fell short of his expectations, and he questioned the company's strategy of aiming for broader market appeal. He called Tesla "an exceptional start-up luxury auto manufacturer" and said the stock could be a longer-term investment, but not at the current price-to-earnings multiple.

"We are skeptical given (Tesla's) desire to be more than a niche luxury manufacturer by developing a sub-$50k price point (electric car) when the market has shown no appetite, in our opinion, for such a product," he added in a note to clients. "Competition is also looming, so development time will come under pressure, which could drive operational mis-steps."

Jefferies analyst Elaine Kwei was more sanguine, saying that some might have been disappointed in the third-quarter numbers, but she considered it "another quarter of remarkable progress since volume deliveries of the Model S began one year ago."

Kwei said demand for the company's cars exceeds supply. "With a technology advantage, desirable and differentiated products, and proven execution, we think we're only scratching the surface of things to come," she wrote.

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