But Tesla isn’t frozen by the rising competition and doesn’t appear to be cracking under pressure. Instead, it ramped up its production levels on its Model S premium sedan to 500 per week in the second quarter, a 25% increase over first-quarter levels, with expectations to increase vehicle production in the coming years.
| Year | 2013 | 2014 | 2016 |
| Projected Vehicle Production | 21,000 | 40,000 | 100,000 |
Source: CNBC
While J.C. Penney is overburdened with real estate and underwhelmed by sales, Tesla is making an expansion push. The electric vehicle maker opened more than a half a dozen retail locations in the second quarter including its maiden location in China. Tesla recently began shipping its Model S sedans to Europe, and projects that sales of the vehicle are on track to surpass 40,000 per year by late 2014.
Tesla’s balance sheet is strong; the company boasts nearly $750 million in cash as of the second quarter, which becomes more impressive when you realize that the amount reflects a $516 million sequential increase. The company has $578 million in long-term debt . With the exception of the pricey entry point — shares have more than tripled year-to-date — there’s not much not to like about the company. I would use a pullback in the shares as an opportunity to make an offensive move and buy, and fully expect to be rewarded in the coming years.
Between innings
In keeping with the theme on leadership, let’s take a look at a company that seems to be caught between innings — Hewlett-Packard Company (NYSE:HPQ). Meg Whitman was dealt a tough hand when she took the top spot at the company in January 2011.
The company hasn’t abandoned its dividend, despite an identity crisis (PCs, enterprise/servers/storage, printing, etc), and shareholders earn a yield of 2.2%. Shareholders shouldn’t be too worried about the dividend being in any type of jeopardy — the company generated $7.2 billion in free cash flow so far in its fiscal year, and is approaching a zero net-debt position.
On a defensive note, the company has reneged on earlier projections to achieve revenue growth in fiscal 2014. That’s no longer possible, says Whitman in a recent CNBC interview, as the company faces headwinds such as pricing pressure in the server business and instability in the PC market.
But Hewlett-Packard Company (NYSE:HPQ) is also playing offense. The company returned $283 million to shareholders in the most recent quarter by way of dividends and share buybacks. And with net debt nearly wiped out, it is looking to grow by strategic acquisition. The company would consider deal sizes between the $100 million to $1.5 billion range. The takeaway here is that despite the fact that HP is in the midst of a five-year turnaround, it hasn’t abandoned growth or its shareholders.
Conclusion
In business, just like in sports, there needs to be a strong offense and defense in place in order to succeed. Even a growing company like Tesla must be aware of its competition, which it is, and yet keep its sights set on new opportunities. J.C. Penney doesn’t have its offensive team on the field at this point, and its defense isn’t doing all that great either. As for HP, it’s a promising turnaround story.
The article J.C. Penney – A Team With No Offense originally appeared on Fool.com and is written by Gerelyn Terzo.
Gerelyn Terzo has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors.
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