Tesla Motors Inc. (TSLA - Analyst Report) has regained its glory by escalating 10.3% yesterday for the first time since its disappointing debut in NASDAQ-100 on Jul 15. The stock opened at an all-time high of $133.26 on Jul 15 but started falling, witnessing its biggest one-day drop of 14.3% to $109.05 next day since Jan 2012 due to a bearish report by Goldman Sachs (GS - Analyst Report) on the stock.
The turnaround gain of TSLA was attributable to optimism raised by some brokerage firms about the automotive industry in the U.S. as well as about the company being a leading electric vehicle maker. Moreover, Fed chairman Ben Bernanke’s recent announcement of continuing with the stimulus policies raised optimism among the investors.
Auto sales in the U.S. grew 9.2% to 1.40 million units in Jun, translating into a 13.2% year-over-year rise to a seasonally adjusted annual rate (SAAR) of 15.96 million units, the fastest since Dec 2007. The increase was largely attributable to a growing popularity of pickups among buyers amidst improvements in housing, construction and energy sectors.
Further, strong pent-up demand, a plethora of new models, lower interest on auto loans and a resilient economy leading to higher consumer confidence contributed to the big push in auto sales.
Tesla Motors CEO, CTO and co-founder Elon Musk, who is also the co-founder of electronic payments system PayPal and former CEO of rocket ships and spacecraft builder company SpaceX, surprised investors in its tweeter comments on Jul 15 by laying stress on its dream of building a hyperloop rapid transit system in the future. Musk has been talking about this “fifth mode of transportation” alongside trains, planes, cars and boats for almost a year.
Although Musk agrees that his idea of building the futuristic transit system is in alpha stage, his assertions could not be considered as a bluff or something to be laughed at. Some said that the idea could be materialized with the help of pneumatic tube systems, which use compressed air to transport objects through a tube.
TSLA more than tripled this year. The stock started escalating at a fast pace following the release of its surprising 2013-first quarter results on May 8. The company posted its first-ever quarterly profit of $15.4 million, or 12 cents per share, on an adjusted basis, in the first quarter of 2013. This indicated a whopping positive earnings surprise of 271.4% given the Zacks Consensus Estimate of a loss of 7 cents for the quarter.
Revenues jumped manifold to $561.8 million from $30.2 million in the first quarter of 2012. Thanks to the impressive 5,000 units of Model S electric car sales during the quarter.
In May, TSLA also paid off the remaining $465 million U.S. Department of Energy (DOE) loan much earlier than expected. The electric carmaker received the loan in Jan 2010 and agreed on a 10-year repayment program. However, the company repaid the full outstanding amount of the loan in the second installment itself.
Last December, Tesla made its first DOE loan repayment of nearly $13 million. On May 22, the company paid off the remaining $451.8 million using the near-$1 billion proceeds from the common stock and convertible senior note offering made last week.
In May, Tesla also came up with a surprise announcement of adding more supercharging stations across the U.S. that are 10 times faster than the ordinary public charging stations, which could boost demand for its electric cars. TSLA plans to increase the number of charging stations threefold from 9 to 27 by the end of next month, which could further rise to 100 by the end of next year.
By 2014, Tesla plans to install charging stations within the reach of 80% of people in the U.S. and Canada, and 98% by 2015. With this, the company intends to provide supercharging stations every 80 to 100 miles.
Electric cars have always been criticized for limited driving range leading to their weak demand. This led to limited sales of vehicles such as Nissan Motor’s (NSANY - Snapshot Report) Leaf and General Motors’ (GM - Analyst Report) Volt. However, Tesla’s innovative ideas about making electric cars much more affordable and driver-friendly give it a competitive edge over rival automakers.
Tesla reiterated its goal to sell 800 vehicles per week by the end of 2014 and plans to build a minivan next year. It has also teamed up with Japanese electronics behemoth Panasonic to ramp up production of lithium batteries for electric cars.
Currently, shares of Tesla retain a Zacks Rank #3, which implies a short-term (one to three months) Hold rating.