When electric car maker Tesla (TSLA, Financial) reported its earnings for the fourth quarter on February 11, analysts and investors were waiting to check its sales numbers as well as whether it has been able to meet the lofty expectations already built by CEO Elon Musk in the Detroit Auto Show last January. Unfortunately when the report was released, it was stunning for both investors and analysts as Tesla missed on both top and bottom line estimates for the quarter. Soon after the results were announced, the stock plummeted by more than 2% in after-hours trading. Let’s dive into the article and find how Tesla missed on its targets and what are the major takeaways from the earnings call. Here we go.
The number card that ran below expectations
The EV maker’s reported revenue and profits fell below analysts’ expectations as it posted an adjusted loss of $0.13 a share, compared to the $0.33 a share gain it had posted a year earlier in the same quarter. Street analysts had estimated earnings to be roughly around $0.31 a share for the quarter, and thus were confused on the sudden drop in quarterly earnings.
Revenue came in at $1.1 billion for the quarter, up by a whopping 45% from that reported in the final quarter a year ago, but missed the analyst estimates which were standing at $1.23 billion in revenue. Though there was growth seen in the revenue component of Tesla, there were existing headwinds like foreign currency factor due to the strength of the dollar, lower delivery than estimated on Model S for the quarter and severe winter which led to shipping problems. Hence, the EV maker failed to match the analyst estimates for the quarter.
The worst part of the fiscal year was that it was not able to match the delivery of 33,000 cars for 2014. In fact, to achieve the same Tesla would have needed to deliver nearly 11,200 vehicles in the fourth quarter but due to the headwinds discussed above it failed to meet the set targets. Instead it was able to deliver only around 9,834 vehicles during the quarter. Hence, the gap of around 1,400 vehicles created in the month of December (that were pushed for delivery in January this year) took a toll on the stock which took a downtrend after the earnings report was formally announced.
CEO remains bullish on upcoming fiscal year estimates
Though the company might have given several excuses to explain why it missed the delivery target in the final quarter, Elon Musk looked completely optimistic on reaching better sales numbers in the 2015 fiscal year. Tesla has estimated that it would be delivering around 55,000 vehicles in 2015, of which nearly 40% of the deliveries would take shape in the first half of the year. If Tesla is able to meet the numbers in 2015, it would mark a great leap by about 70% over the delivery count of the prior year.
Tesla reiterated on the increase of sticker price in countries where the local currency has seen a drastic decline, against the U.S. dollar. Such a differential pricing at those international locations might hurt sales to a limited extent, but the company stays confident that there would be no impact of the price sensitivity until the second quarter of the 2015 fiscal year.
Investors were interested to know if Tesla’s new Model X production would be as per the earlier set schedule, and during the earnings call, the management shared that the shipping of the falcon-winged SUV would possibly begin within the next six months. They further stated that the company started the year with nearly 20,000 reservations for the upcoming model and has build more than 30 “beta” models of the Model X which are presently undergoing “extensive testing.”
Gigafactory and Model 3 to serve as future key drivers
Tesla stated that the construction of the Gigafactory outside Nevada was proceeding smoothly and it expects to begin the battery production by 2016. This factory has been highlighted to become Tesla’s trump card for phenomenal sales in the future years as it would be able to manufacture cheaper and better batteries for the mass market. Since such batteries would first be tested in Model 3 which is to be launched with a reasonable sticker price ranging between $35,000 and $40,000 in the coming two to three years, Tesla expects to see rosy days in the coming future amid intense competition from fellow peers.
Final word
Though Tesla expects to see better numbers in the coming year, investors and analysts need to closely wait through the first half of the fiscal year to make an estimate of whether the company will meet its targets set for 2015. With the Model X release in the coming six months and Model S sales gaining traction from early this year, Tesla’s CEO is confident of leading the race in the EV market which is slowly growing rich with competition looming from all corners.