There seems to be a Seeking Alpha contributor (John Petersen) giving a dissenting opinion over what was a phenomenal quarter for Tesla Motors Inc (NASDAQ:TSLA). In a recent article John Petersen stated, “Few commentators and even fewer investors understand that Tesla’s Q1 income guidance is little more than an epic April Fools prank, an aberration attributable to the confluence of non-recurring factors that will leave Tesla Motors Inc (NASDAQ:TSLA) solidly in the red for the next two years.” However, I believe that the non-recurring factors were already taken into consideration when the company’s management team offered their strong guidance for the whole fiscal year.
Now if you looked closely at the article, the author states elaborate details of the Zero Emission Vehicle credits. However, Tesla Motors management team has clearly stated, “We expect that our gross margin will continue to rise into the second half of the year to our target of 25% assuming no contribution from ZEV credits.” This means that Tesla Motors Inc (NASDAQ:TSLA) isn’t relying on ZEV energy credits in order to boost margins or sales. In other words, Tesla is a fully self-sustaining business no longer in need of government subsidies and loans. This puts investors in a good position as the company was finally able to report a profit for the first time in ten years.
Tesla earnings highlights
Tesla Motors Inc (NASDAQ:TSLA) has been able to report a fairly phenomenal quarter in the past fiscal year. The company’s highlights included growth in revenue quarter-over-quarter from $294 million to $555 million (83% growth from quarter 4). This implies that the company’s overall growth is starting to accelerate. The company hopes to generate a gross margin of 25% by the end of the fiscal year and hopes to achieve this by improving the overall efficiency of the business operation. In its most recent results, the company was able to reduce the build time of a car by 40%. Reducing the cost of labor by 40% will drastically improve the company’s profitability. This improvement in profitability is what is likely to offset the negative effects of declining ZEV energy credits.
The company’s improvement in management efficiencies along with better product distribution through its retail stores in various locations across the country is what is causing the stock to move in a parabolic manner. The company’s stock price has been able to advance by 147.2% since the beginning of the year.
The guidance was strong
Tesla Motors Inc (NASDAQ:TSLA) was able to guide to a 21,000 delivery figure for the full fiscal year of 2013. The company’s guidance was about 5% better than what the company provided in earlier guidance. That being the case, the company also alluded to a 25% gross margin for the full year of 2013.
Analysts on a consensus basis expect the company to grow its sales by 365.50% for the current fiscal year. Analysts expect earnings to grow by 104% for the current fiscal year with the following year earnings growth estimate set at 938% on a consensus basis.
The company’s five-year growth rate projection on a consensus basis is 46%, one of the driving factors behind the stock’s torrid ascent.