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Musk Delivers on Promise For Tesla Profitability
Tesla Motors Inc. (TSLA), the maker of electric cars run by billionaire Elon Musk, surged as much as 26 percent after posting its first profit and beating estimates on sales of luxury Model S sedans.
Tesla gained 23 percent to $68.36 at 11:45 a.m. New York time after reaching $70.48, a record intraday price. Tesla's market capitalization reached about $7.9 billion, exceeding $7.8 billion for Turin, Italy-based Fiat SpA (F), the majority owner of Chrysler Group LLC.
First-quarter net income totaled $11.2 million from a loss of $89.9 million a year earlier, Palo Alto, California-based Tesla said in a statement on its website yesterday. Excluding some items, the profit was 12 cents a share, compared with a year-earlier loss of 76 cents. The average estimate of 10 analysts surveyed by Bloomberg was for a profit of 4 cents.
'The stock is trading like it's 1999 and we're in the Internet bubble again,' said Maryann Keller, principal at consulting firm Maryann Keller & Associates in Stamford, Connecticut. 'It has nothing to do with Tesla's fundamentals. It has to do with pie-in-the-sky aspirations that don't reflect the realities of the auto industry.'
Tesla shares gained 65 percent this year through yesterday, compared with a 15 percent rise in the Russell 1000 Index.
'Hat's Off''My hat's off to them,' Bill Ford, executive chairman of Ford Motor Co. (F), said of Tesla today after his company's annual meeting in Wilmington, Delaware.
'It's really hard to start up a company, particularly in the auto business, and be successful,' said Ford, great-grandson of company founder Henry Ford. 'We've seen many who have not, and so the fact that they are off to a really good start and doing well, I think, is a real tribute to them.'
Separately, the Model S received the highest rating from Consumer Reports as the luxury sedan scored 99 out of 100 points, the magazine said in an e-mailed statement.
Tesla said it sold 4,900 Model S sedans in the quarter. The company said March 31 deliveries of the car exceeded 4,750 in 2013's first three months, better than a prior forecast of 4,500. Full-year Model S deliveries should total about 21,000 vehicles, up from an earlier 20,000-unit goal, the company said.
By comparison, Fiat delivered 1.02 million cars and trucks worldwide in the first quarter. Revenue for the quarter totaled 19.8 billion euros ($26.1 billion).
Market ValuationTesla's market valuation puts it in the lower ranks of the world's automakers. In addition to Fiat, Tesla's market valuation exceeds Paris-based PSA Peugeot Citroen (UG)'s $2.8 billion.
Tesla still lags behind smaller Japanese automakers, including Mazda Motor Corp. (7261)'s $10 billion market valuation and the $15 billion for Fuji Heavy Industries Ltd. (7270), the maker of Subaru cars.
Tesla is dwarfed by Detroit-based General Motors Co. (GM) at about $44 billion and Ford Motor Co. (F) at about $55 billion. The market valuation of Toyota Motor Corp. (7203), the world's largest automaker by vehicle sales, is about $200 billion.
The profit and market capitalization are milestones for a company that has been at the center of the debate over the future of electric cars. Musk led the company's defense of the Model S against a New York Times story in February that questioned the car's driving range in cold weather.
The Times story described a test-drive between Washington and Boston that ended with a stalled Model S being loaded on a tow truck. Musk called the report 'fake' and told Bloomberg Television it trimmed Tesla's stock-market value by as much as $100 million. The public editor for the newspaper said its reporter didn't use good judgment and 'left himself open to valid criticism.'
Vehicle CreditsThe company's revenue surged to $561.8 million from $30.2 million in the year-earlier quarter, which was before Model S production began. Sales of so-called zero-emission vehicle credits to automakers Tesla didn't name generated $68 million, or 12 percent of revenue, in the quarter. Revenue from such sales will drop in the second and third quarters and there may be none in the fourth quarter, Musk said on a conference call.
'I'd be lying if I said it wasn't somewhat surprising to see they've been able to turn a profit so quickly' on the Model S, Alec Gutierrez, an industry analyst for Kelley Blue Book, said in a phone interview. 'It has the right stuff to be a strong player in the industry,' said Gutierrez, who is based in Irvine, California.
Tesla had a loss from operations of $5.58 million, down from $88.8 million a year earlier.
Top SellerTesla ended the quarter as the top seller of rechargeable autos in North America. Its Model S deliveries exceeded the 4,421 sales of GM's Chevrolet Volt plug-in hybrid and 3,695 deliveries of Nissan Motor Co. (7201)'s Leaf.
The company said yesterday that it expects annual global demand for its vehicles to exceed 30,000 units a year.
'We exceeded our own target for deliveries,' Chief Executive Officer Musk and Chief Financial Officer Deepak Ahuja said in the statement. '2013 is off to a strong start.'
In March, Tesla sales representatives e-mailed some customers who hadn't completed a Model S purchase to do so prior to the end of the quarter to help the company attain its first profit. Musk said the wording of the messages by 'overzealous' staff wasn't approved by the company. The company said yesterday it followed strict procedures for booking sales.
'Signed Off''Even if a car was received, fully paid for and signed off as good by a customer, we did not recognize the revenue if the paperwork was incorrect,' Musk and Ahuja said in the statement.
The company, which was awarded a $465 million Energy Department loan in 2009, said it made a principal payment 'of almost $13 million' during the quarter. Musk has committed the company to repaying the loan within five years, half the original period.
Accelerating the loan repayments gave the company a one-time benefit during the quarter. Excluding that benefit, Tesla said it earned less than half a cent per share in the quarter.
Musk's fortune has soared 44 percent this year to $3.4 billion, according to the Bloomberg Billionaires Index. Tesla is considering eventually adding driverless technology to its vehicles and is discussing the prospects for such systems with Google Inc., Musk said in an interview last week.
To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
Enlarge image Tesla First Profit Tops Estimates on Rising Model S SalesPatrick T. Fallon/Bloomberg
First-quarter net income totaled $11.2 million from a loss of $89.9 million a year earlier, Palo Alto, California-based Tesla said in a statement on its website yesterday.
First-quarter net income totaled $11.2 million from a loss of $89.9 million a year earlier, Palo Alto, California-based Tesla said in a statement on its website yesterday. Photographer: Patrick T. Fallon/Bloomberg
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May 8 (Bloomberg) -- Matt Miller reports on Tesla's earnings on Bloomberg Television's "Street Smart." (Source: Bloomberg)
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May 7 (Bloomberg) -- Elon Musk, the California billionaire who leads Tesla Motors, said the electric-car maker is considering adding driverless technology to its vehicles and discussing the prospects for such systems with Google. Bloomberg's Alan Ohnsman reports on Bloomberg Televisions' "Bloomberg West"
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