Tesla Motors Inc (TSLA) Finally Swings to a Profit

Perhaps the greatest challenge of our time is weaning ourselves off our crippling dependence on fossil fuels, and moving towards renewable energy sources as a means of fulfilling our power needs. Cars are one of the biggest guzzlers of these fossil fuels, and as such, electric cars have been getting a lot of attention over the last few years. Tesla Motors Inc (NASDAQ:TSLA), headed by Paypal’s Elon Musk, is one of the companies on the frontier of electric vehicle manufacture. After three years of losses, the firm has finally announced a quarterly profit. This is a very important development for the company, and ultimately, the viability of producing electric cars.

Tesla Motors Inc. (TSLA)

Company Overview

Tesla Motors Inc (NASDAQ:TSLA) engages in the design, manufacture and marketing of electric vehicles and powertrain components. The company sells its products through its 32 stores in America, Europe and Asia, as well as over the internet. The company has less than 3,000 fulltime employees and a market cap of around 5 billion dollars. The stock is up some 18% in the last twelve months, much of this gain following the most recently quarterly earnings report.

First Quarterly Profit

Since making its market debut in 2010, Tesla Motors Inc (NASDAQ:TSLA) consistently posted losses. This isn’t necessarily unusual for startups, and especially for those in a pioneer industry like electric vehicles. However, annual EPS also missed estimates in 2010 through 2012, recovering somewhat in 2011 before dipping again in 2012 to a loss of $3.20 per share. Finally, the company reported guidance for first quarter of full profitability on Monday, sending shares flying 16%.

The driver for these positive earnings was the company’s flagship Model S sedan. The Tesla Motors Inc (NASDAQ:TSLA) model S scooped up the Car of the Year award, beating out some high-profile contenders such as Porsche and BMW. Sales for this model came in at over 4,750 vehicles, topping the previous guidance of 4,500. The company is now expecting a slight first quarter profit on a GAAP and non-GAAP basis. The company furthermore announced on Tuesday its plans for a financing program, which they hope will make it easier for consumers to be able to afford one of these cars.

Contrasting with this sales report was the news that electric vehicle sales for a number of other EV manufacturers dropped sharply in January, with General Motors Company (NYSE:GM)‘s Chevy Volt sales down 57% and the Toyota Motor Corporation (ADR) (NYSE:TM) Prius Plug-In down 36%. According to General Motors Company (NYSE:GM) officials, the drop in sales was largely attributable to the December spike, when many consumers bought a new vehicle to enjoy 2012 tax benefits. Toyota Motor Corporation (ADR) (NYSE:TM) officials on the other hand blamed the drop on model changeovers that limited the amount of vehicles up for sale. It is important to note that the Volt and the Prius Plug-In are not fully electric vehicles, but gasoline-electricity hybrids, whereas the Model S is indeed a fully electric vehicle.

Competition

The electric vehicle and hybrid space is obviously getting more crowded, as more and more manufactures have wizened up to the importance of this type of offering. The price tag of the Model S may be one of the biggest hurdles for consumers. Whereas a Volt can be had for around $40,000, and the Prius Plug-In starts at $32,000, you won’t get a new Model S for less than $70,000. On the other hand, the Model S is said to have triple the range of competitors at about 265 miles, as well as luxury interior and large passenger capacity. The two hybrid competitors mentioned here don’t have much full-electric range to speak of, both topping at around 40 miles. In terms of fully electric competition, the world’s bestselling EV’s are the Nissan Leaf, with nearly 50,000 units sold in 2012, and the Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU) i-MiEV, with around 27,000 units sold.

The bottom line

With Tesla Motors Inc (NASDAQ:TSLA)’s first quarterly profit since becoming a publicly traded company, it appears as if the company has turned a corner. This is not only good news for Tesla Motors Inc (NASDAQ:TSLA), but also for the viability of fully electric cars as an alternative to traditional gasoline powered vehicles. While the Model S is clearly an up-market product, reflected in the hefty price tag, the increased interest in the vehicle is encouraging. In any case, the new financing program should make it easier for consumers to access a Model S. It will be very interesting to see how this company performs over the rest of the year.

Daniel James has no position in any stocks mentioned. The Motley Fool recommends General Motors and Tesla Motors. The Motley Fool owns shares of Tesla Motors.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!