Tesla SHOCKS Investors Again With A Surprise Profit

Tesla reported
Q2 profit of $US0.20 per share, on revenue of $US405 million.
This beat expectations for a loss of $US0.19 per share, on revenue of $US387.9 million.

Taking into account lease accounting, non-cash items and one-time charges of $US16 million with the repayment of the Department of Energy loan, GAAP net loss was $US31 million or $US0.26 per share.

Overall revenue remained flat because of the decline in zero-emission vehicle (ZEV) credits.

Q2 production rate improved 25% to 500 cars a week. 5,150 cars were delivered in the quarter, beating the company’s expectations for 4,500 deliveries.

The company had $US747 million cash at the end of the second quarter.

The press release offered some colour on how Tesla managed to lower costs.

“Significant cost improvements were achieved as a result of execution of our roadmap including redesigning many elements of Model S for greater ease of manufacturing, economies of scale and supply chain improvements. Importantly, we were able to make nuanced improvements to the car at the same time, as reducing cost does not count if it makes a product worse. Further execution on our cost reduction roadmap is expected to continue to improve non-GAAP automotive gross margin to our target level of 25% (excluding ZEV credits) in Q4 this year. We are cautiously optimistic that a number above that level may be achievable in future quarters.”

Tesla is on track for 25% gross margin ex-ZEV credits in Q4, according to the release. What’s more, the company’s lease-buy program also turned out to be popular with 30% of vehicles delivered in Q2 taking advantage of it.

Tesla expects to deliver “slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013.” The company expects to spend $US150 million in the second half of the year in capital expenditure.

“R&D expenses are expected to increase significantly in Q3 as we accelerate product development efforts on Model X, Model S right hand drive, and localisation of Model S for international markets. SG&A expenses will also rise, driven by the growth in our retail locations, service centres and Supercharger facilities.

“Going forward, we expect to be non-GAAP profitable and generate positive cash flow from operations every quarter this year excluding any benefit from ZEV credits.”

The stock is up a whopping 14% after hours and is over $US153.

Tesla reported its first ever quarterly profit in Q1 2013. Since then its stock has been on a tear.

Following the Q1 profit, Donn Vickrey at Gradient Analytics said “the company’s results have been driven by nonrecurring boosts and accounting gimmicks, all of which are either unsustainable or purely cosmetic,” giving the company’s earnings an ‘F’.

But there have been analysts who have come out in support of Tesla.

Adam Jonas at Morgan Stanley called Tesla ‘America’s fourth automaker’ and raised his price target to $US103. Deutsche Bank’s Dan Galves raised his price target to $US160. Meanwhile, Andrea James of Dougherty & Co., raised her price target to $US200 from $US90.

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