Tesla shares pull back slightly after huge gains

DETROIT (AP) -- Tesla Motors fell more than 5 percent in early trading Tuesday, a brief decline amid huge gains this month after the electric car maker posted its first quarterly profit.

And shares in the Palo Alto, Calif., company retook some of that lost ground by early afternoon.

Tesla's stock price had jumped 74 percent between May 8, when first-quarter earnings were announced, and May 14, when it hit a 52-week high of $97.12. The shares have more than tripled in value since hitting a 52-week low of $25.52 in August of last year.

Tesla on Friday sold 3.39 million shares of new common stock at $92.24 each, plus $600 million worth of senior convertible notes, according to a spokesman for Goldman, Sachs & Co., the lead bank on the sales. The sales formally end on Wednesday, and are expected to bring the company gross proceeds of $968 million. Banks have 30-day options to buy another 509,069 shares and another $60 million in notes, which pay 1.5 percent interest per year.

Also, CEO Elon Musk wrote on Twitter Monday that Tesla intends to pay off a $452.4 million balance on a U.S. government loan, perhaps on Wednesday. Tesla had promised to some proceeds from the sale to retire the loan from the Department of Energy. The company got the $465 million, 10-year loan to develop zero-emissions cars. It will use the rest of the money from the sale to cover its cost, and for general corporate purposes.

Musk wrote that given the government loan repayment, an announcement on additional fast-charging stations for electric cars would be delayed until next week.

THE SPARK: Jefferies analyst Elaine Kwei on Tuesday said the stock drop was a normal decline after such a huge run-up. "There's probably just a little bit of fatigue there," she said. Many investors had shorted the stock, gambling that the company would fail like other electric car and battery makers. But as the stock started to rise around the earnings date, and those investors were forced to buy shares to cover their gambles. That helped to push the price higher, Kwei said. She said there were other factors pushing the stock up as well, mainly momentum from the earnings.

THE BACKGROUND: Tesla now makes only one car, the Model S, which tied for the highest-ever score in Consumer Reports magazine's auto testing earlier this month. The car, which starts at $70,000, had a range of about 180 miles on cold winter days and 225 miles in moderate temperatures, the magazine said. Some analysts have been skeptical that Tesla can keep selling as many cars and making money, especially with so much of its revenue coming from California zero-emissions credits that were sold to other automakers.

Tesla made $11.2 million, with break-even earnings per share, from January through March. But the net profit included a one-time $10.7 million accounting gain connected with the elimination of a Department of Energy warrant liability, plus the cost of stock options. Revenue grew from $30.2 million last year to $561.8 million in the first quarter of 2013. Tesla said it got about $68 million, or 12 percent of its revenue, from California zero-emission tax credits that were sold to other automakers. The company expects that to fall in future quarters.

Tesla, the brainchild of Musk, a billionaire who founded PayPal and SpaceX, warned that the first-quarter profit won't be repeated in the second quarter. The company said that accounting rules defer revenue recognition from leases, and that will mean a net loss in the April-through-June period. The company said it would report earnings with and without the lease revenue "as we believe the actual effect on Tesla is positive."

Tesla also reported that it beat its targets for delivery and production of the Model S electric car, its only vehicle now on sale. The company delivered 4,900 cars during the first quarter, beating its guidance of 4,500. It also said it produced 400 or more cars per week, or over 5,000 during the quarter, Tesla said in a statement.

THE ANALYSIS: Morgan Stanley analyst Adam Jonas, who is bullish on the stock, told investors last week that selling the credits to other automakers can fund years of capital expenditures for Tesla. Jonas reiterated his "Overweight" rating on Tesla and set a one-year share price target of $103. "Competency in technology is migrating to engineering, manufacturing and marketing. Detroit, Munich, Wolfsburg and Toyota City must feel a sense of astonishment. with a hint of anxiety," Jonas wrote.

SHARE ACTION: Tesla Motors Inc. fell $1.55, or 1.7 percent, to $88.39 in late-day trading Tuesday.