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Shares of Tesla Motors, Inc. (TSLA - Analyst Report) dropped 12.9% to $154 in after-hours trading as the company posted a loss in the third quarter of 2013. The Palo Alto-based automaker logged adjusted loss (including stock-based compensation expense) of 4 cents per share in the third quarter of 2013, which was narrower than the loss of $1.04 per share recorded in the year-ago quarter. This compared unfavorably with the Zacks Consensus Estimate of break-even results.

Third-quarter 2013 earnings exclude non-cash interest expense related to convertible notes of 3 cents per share and deferred gross profit for Model S due to lease accounting of 21 cents. On the other hand, 2012 earnings exclude unfavorable change in fair value of warrant liability of 1 penny per share. Including these items, the company reported net loss of $38.5 million or 28 cents per share compared to $110.8 million or $1.05 in the third quarter of 2012.

Revenues, excluding Model S revenue deferred due to lease accounting, jumped manifold to $602.6 million in the quarter from $50.1 million a year ago, beating the Zacks Consensus Estimate of $553 million.

Year-over-year improvement in revenues was driven by higher vehicle deliveries and increase in average selling price of the vehicles together with a better mix of cars. The increase in average selling price resulted from the initiation of vehicle deliveries in Europe. Tesla also benefited from the sales of electric powertrain components to Toyota Motor Corp. (TM - Analyst Report) for the RAV4 EV.

Tesla delivered 5,500 cars in the third quarter, of which 1,000 vehicles were delivered to Europe. The automaker plans to enhance its production capacity further to meet the rising demand.

Gross profit amounted to $134.6 million in third quarter of 2013, against a loss of $8.3 million in the year-ago quarter.

Revenues on a reported basis from Automotive sales jumped to $430.2 million in the quarter from $50 million a year ago. Reported revenues from Development services (produces electric vehicle, powertrain components and systems for other automobile manufacturers) increased to $1.2 million from $0.08 million a year ago.

Financial Position

Tesla had cash and cash equivalents of $795.1 million as of Sep 30, 2013, compared with $85.7 million as of Sep 30, 2012. Long-term debt was $582.5 million as of Sep 30, 2013, versus $465 million as of Sep 30, 2012.

Cash flow from operating activities amounted to $128.2 million in the first nine months of 2013, compared with cash outflow of $228.6 million in the same period of 2012. Capital expenditures fell marginally to $174.8 million from $175.2 million in the first nine months of 2012.


Tesla anticipates delivering marginally less than 6,000 Model S vehicles in the fourth quarter of 2013 and 21,500 vehicles globally in 2013. Adjusted profits are expected to be in line with the third quarter of 2013.

Adjusted automotive gross margin is expected to reach the company’s target of 25% in the fourth quarter of 2013. The company believes that declining manufacturing costs will benefit gross margin over the next few quarters.

Further, the company believes that research and development expenses will increase 25% sequentially in the fourth quarter of 2013 due to increased efforts on development of Model X and Model S enhancements. SG&A expenses are also projected to increase by 20% due to increase in retail locations, service centers and Supercharger facilities. Capital expenditures are expected to be around $75 million to $85 million for the fourth quarter and about $250 million for 2013.

Tesla designs and manufactures electric vehicles and electric vehicle powertrain components for partners including Toyota and Daimler AG (DDAIF). The automaker currently retains a Zacks Rank #3 (Hold).

Ford Motor Co. (F - Analyst Report), a Zacks Rank #1 (Strong Buy) stock, is performing well in the automobile industry.

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