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Analyst Blog

On Feb 27, 2014, we issued an updated research report on Tesla Motors, Inc. (TSLA - Analyst Report).The company has clinched a substantial share of the electric car market, thanks to an impressive product portfolio and a rapidly developing Supercharger network. Its rising production and sales as well as rapid international expansion are other positives.

Although Tesla faces headwinds like production constraints, high prices and mounting expenses and is yet to generate sustainable profits, it is well placed to gain from product launches and international expansion.

Tesla logged adjusted income (including stock-based compensation expenses) of 13 cents per share in the fourth quarter of 2013, rebounding from a loss of 78 cents per share recorded in the year-ago quarter. This compared favorably with the Zacks Consensus Estimate of 4 cents.

Tesla reported positive earnings surprises in 3 of the trailing 4 quarters with an average beat of 125.93%. The Zacks Consensus Estimate for 2014 earnings of $1.35 indicates a significant jump from the 2013 earnings per share.

Increased factory capacity and lower supplier bottlenecks are helping Tesla in increasing production to meet the rising demand for Model S. The electric carmaker expects production volume to increase to 1,000 cars per week by the end of 2014 from 600 cars per week at present. Tesla anticipates delivering more than 35,000 vehicles globally in 2014, up 55% over 2013.

However, Tesla’s results are being adversely affected by high research and development (R&D) and selling, general and administrative (SG&A) expenses. R&D expenses increased 21% sequentially in the fourth quarter of 2013 owing to increased spending on the development of Model X and Model S enhancements for the international market. SG&A expenses also increased 30% due to consumer infrastructure development. Both R&D and SG&A expenses are expected to rise in the first quarter of 2014 due to design and engineering work on Model X and increase in retail locations and Supercharger facilities.

Tesla, which currently carries a Zacks Rank #2 (Buy), designs and manufactures electric vehicles and electric vehicle powertrain components for partners like Toyota Motor Corp. (TM - Analyst Report) and Daimler AG .

Tata Motors Limited (TTM - Snapshot Report), a Zacks Rank #1 (Strong Buy) stock, is also performing well in the automobile industry.

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