Tesla Motors (TSLA) was the little engine that could after hours Wednesday when its stock rocketed 13% following a blowout profit report where analysts had expected to see a loss.
Tesla stock fell 5.6% in Wednesday's regular session, though some analysts had hinted that the company might surprise with a profit. Still, shares of the electric-car maker have nearly quadrupled this year.
The company said it delivered 5,150 vehicles in North America, ahead of analyst views and its guidance, and fueling Q2 profit ex items of 5 cents a share on non-GAAP revenue of $551.95 million. That drove past estimates for a 17-cent loss on revenue of $383.4 million. A year earlier, it posted an 89-cent loss and $26.7 million in revenue, but it turned its first profit in Q1. It posted a GAAP Q2 net loss of 26 cents, down from $1 in Q2 2012.
"While profits were still modest in absolute terms and not our primary mission, net income increased by 70% from last quarter, driven by record Model S deliveries and a significant improvement in automotive gross margin," Tesla CEO Elon Musk said in a letter to shareholders. If demand in Asia matches North America and Europe, Model S sales could exceed 40,000 a year by late 2014, he said.
The company sees just over 5,000 Model S sedan deliveries in Q3 and 21,000 for 2013.
Dougherty & Co. analyst Andrea James said investors were looking for Q2 deliveries near 5,000 cars. For gross margin, she says Wall Street would like to see 25% by year-end. That's still Tesla's target, which Musk on a conference call said is "a significant hill to climb." Tesla reported non-GAAP gross margin of 22% for Q2, up from 17% in Q1.
Baird & Co. analyst Ben Kallo saw production, deliveries and gross margin gains as the three big issues on investors' minds.
Tesla introduced a leaselike purchase option in April that requires accounting for the revenue over about three years. So a big question was "the movement of mix to the financing program" and its impact on the bottom line, Kallo told IBD.
"A Q2 natural gross margin (excluding regulatory credits) of greater than 10% would be a positive for the stock," Kallo said in a Monday research note.
Musk said more than 30% of cars delivered in Q2 used the financing program, a figure he expects to increase.
"There's been a lot of interest in whether they'd be profitable two quarters in a row, but I've been focused on more longer-term indicators: productivity at the plant, sales, and there's this whole thing with green credits and whether they'll be able to sell them," said Karl Brauer, an analyst at car guide company Kelley Blue Book.
In Q2, Tesla recorded $51 million from selling zero-emission vehicle credits to other automakers looking to avoid fines. That's down from $68 million in Q1.
Tesla recently raised prices on its Model S sedan lineup a little — they now range from about $71,000 to $90,000 before a $7,500 federal tax credit. The company has been able to keep a premium price strategy even as mainstream automakers are resorting to lower prices and lease deals to push their electric offerings, says Brauer's colleague at Kelley, analyst Alec Gutierrez.
Tesla has found success competing with an electric against luxury heavyweights, Gutierrez notes. But the true test "will come when they attempt to compete in the more mainstream categories."
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