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Tesla Motors (TSLA:NASDAQ) - On The Verge of Changing Everything, But Questions Remain

Chris BerryComment

By Chris Berry

 

Charging Ahead

Last week, TSLA released its Q2 2014 earnings. As a proponent of disruptive business models and the raw materials necessary to enable the upheaval, I always listen with rapt attention. The earnings of $0.11 per share on net income of $16 million (non-GAAP), and a loss of $0.50 per share on net income of $62 million (GAAP) were enough to satisfy the market and after a brief dip in after hours trading, the share price rebounded strongly.

As is the case with many of the early-stage companies I follow, I’m more interested in production metrics, though revenue here is accelerating, indicating that TSLA is having no problem selling its cars. I’m willing to tolerate negative earnings and cash flow as long as the company is investing in future growth and increasing sales.

This is clearly the case with TSLA which reported record production (8,763 Model S) and deliveries (7,579 Model S) in Q2 and is on track for more than 35,000 deliveries in 2014 with the stated goal of 100,000 deliveries by the end of 2015. Additionally, with a Cap Ex guidance of $850 million, TSLA has a Cap Ex/Sales ratio of over 20% - unparalleled in the automotive business according to the FT. The next closest is Jaguar at 12%. TSLA is clearly a company in its early growth phase.

Rather than dissect the numbers here, I think it’s important to look at the main takeaways from the call and consider any questions that arise for the company as they continue on an exciting journey to revolutionize the automotive and energy storage businesses.