Tesla Motors (TSLA) hits sales record. Investors hit sell button.(Read article summary)
Tesla Motors' (TSLA) third-quarter sales numbers came in under most analysts' expectations late Tuesday, and the electric carmaker's stock price plunged, triggering a 'circuit breaker' on the Nasdaq. But the fundamentals of Tesla Motors appear to remain strong, and the California-based company has plans for expansion.
Tesla Motors (TSLA) sold a record 5,500 of its Model S electric cars in the third quarter of 2013. Investors sold the stock in droves, triggering a Nasdaq "circuit breaker" designed to slow sales of the stock.
Analysts have come to expect a lot out of the luxury electric carmaker, which has continually defied expectations in a tight automotive market. When sales numbers came in under most analysts' expectations late Tuesday, Tesla Motors' stock price took a big hit.
But Tesla's earnings report suggests the company's fundamentals remain strong, and Elon Musk, its chief executive, isn't one to think small. Investors can continue to expect a lot from the company in the coming months and years. Among other plans, Mr. Musk is contemplating building a factory to produce the lithium-ion batteries needed to power the company's electric cars.
“This will be a giant facility. We are talking about something that is comparable to all of the lithium-ion battery production in the world — in one factory,” Musk said during a conference call with analysts late Tuesday, Forbes reported. “It’s big.”
Maybe not big enough for investors. Shares of Tesla Motors (TSLA) were down about 15 percent to $150.21 in midday trading Wednesday as investors had hoped for just a bit more out of the 10-year-old company based in Palo Alto, Calif. The stock had been on a tear to start November, briefly surpassing $181 Tuesday in anticipation of the Q3 numbers.
"There has been so much positive drama for Mr. Musk’s cars over the past year that when an earnings report comes in essentially showing everything as 'fine' business analysts and investors balk," Karl Brauer, senior analyst for Kelley Blue Book, wrote in an e-mailed statement. "It appears that, for Tesla, fine isn’t good enough."
If the numbers disappoint, it's because of demand outpacing supply, according to Musk. The company sold 1,000 units in Europe last quarter, and has plans to expand to car-hungry China in January.
As a result, Tesla is expanding production at its factory in the Netherlands, and is calling on Panasonic, a supplier of lithium-ion battery cells, to produce 1.8 billion cells over four years. That's more than three times the original agreement between the two companies signed in 2011.
"This number should be viewed as more of a floor than a ceiling," Musk wrote in a letter to shareholders.
In the US, the company is focusing on charging infrastructure, with hopes of easing public concerns over the range of electric cars. By the end of the year, Tesla expects its drivers to be able to drive across the country using an expanded network of its fast-charging Superchargers.
The company has also seemed to largely dodge the bullet of two recent accident-related battery fires, which have a history of bad public relations for electric car companies.
"All vehicles carry energy and face the risk that this energy could be released in an accident," Musk wrote in the shareholder letter. "Even though the electrical energy stored in the battery pack is only about one tenth of the chemical energy stored in a tank of gasoline, we have designed complementary safety systems into the battery pack, including armor plating, internal firewalls and monitoring systems which provide additional layers of protection."