Tesla Motors, Inc. (TSLA, Financial) reported a surge in Model S sedan sales in the first quarter of this year. The U.S. automaker delivered a whopping 10,030 Model S sedans in the first quarter, which was almost 530 units more than its own forecast provided earlier to analysts. In 2014 Tesla had sold 31,655 vehicles, but the company is forecasting delivery of 55,000 units for the year. The share price which had taken a dip last week revived and rose 4.67% in early market trading as soon as the announcement was made public on April 6 with regard to the improvement in deliveries. Let’s get into the facts which were shared by Tesla’s management which aided in the stock increase.
Tesla’s stock has shown positivity as management remains optimistic
In fact, last week when the company announced its plans to cut jobs in China due to weak demand for its cars, the stock had immediately taken a dip. In spite of this, the company remained positive on bringing about positive changes in the country in the long run. Besides, it is also believed that the stock price fell due to oil pricing issues which has increased the competition in the auto industry.
But after this sales announcement was made, shareholders and investors flocked to the stock and the share price witnessed the highest improvement since late February. It seems that the market has raised its hopes higher on Tesla's performance after this announcement. The sales improvement in the first three months of 2015 was by a whopping 55%, when compared to the corresponding quarter of the past year. The main reason for the increase in sales was the high delivery of the Model S sedan in the holiday quarter. Around 10,030 Model S sedans were delivered in the first quarter itself. The previous guidance was 9,500, thereby making an increase of approximately 530 vehicles.
What is to be noted is that 1,400 cars delivered in this first quarter of the year was actually manufactured in the last quarter of 2014. The reasons for such late deliveries were shipping issues, severe weather problems and customers being on holidays. Besides Tesla Chairman Elon Musk unveiled the dual chassis of the Model D car in Los Angeles recently. In a press statement, the company also said that the sales figure is among many of the other indicators reflecting its financial performance. Some of the indicators include foreign exchange movements, cost of sales, etc. Hence, the delivery count should not be considered as the only factor for the stock increase.
The California-based company earned $3.198 billion in revenue for the fiscal year 2014 and an operating income of $186.7 million. Total assets were valued at $5.849 billion while the total equity for 2014 was $911.7 million. Ben Kallo, an analyst at Baird said that the reported figures beat theirs as well as Wall Street's estimates. This proves that the company has an opportunity to tap positive catalysts in the future, he said. A good thing about Tesla is that it plans on reporting its deliveries three days before the end of each quarter . This would ensure reduction in reporting errors which crop up between the declaration of financial reports and the quarter end.
With the company expecting an increase of around 74% in total deliveries this year when compared on a year-over-year basis, it seems that Tesla is truly on a sales growth trajectory. The number of deliveries is estimated to grow to 500,000 by 2020. In order to achieve such a high target, the company has to witness a breakthrough in manufacturing Model X SUVs. And the best part is that the company management does not expect to be profitable before 2020, providing it the leverage to focus more on maintaining its deliveries than on reaping profits in the coming few years.
Parting word
Tesla stock price had declined 3% in the last three months of 2015, but this news proved to be a relief for shareholders. The news has literally created ripples in the share market as Tesla shares performed the best on NASDAQ on April 6. Let’s stay tuned and keep watching if the actual deliveries for the year are able to match the management guidance provided for 2015.
