Loss Seen As Step To Big Long-Term Profits.
Luxury electric car maker Tesla Motors’ shares hit new records after its latest financial results, with the latest price of close to $150 a share showing a gain of about 350 per cent for 2013.
Investors apparently want to make sure they have a piece of a new company which they hope will be a big and profitable player for years to come.
Deutsche Bank believes Tesla sales will reach at least 200,000 a year before the end of the decade. Morgan Stanley reckons Tesla sales will reach 55,000 by 2015, and over 520,000 by 2027. Tesla will make its first operating profit next year, with margins peaking at 17 per cent in 2021 and 2022 before normalizing at 15 per cent, according to Morgan Stanley analyst Adam Jonas.
Thomson Reuter’s Breaking Views analyst Antony Currie likened Tesla CEO Elon Musk to the late Apple leader Steve Jobs.
Looking at the latest financial data from Tesla shows investors are indeed putting faith ahead of practicality. In the second quarter Tesla had a net loss of $30.5 million, after reporting its initial profit in the first quarter. Tesla delivered 5,150 cars during the second quarter, as revenues slipped to $401 million from $561 million in the first quarter. Tesla’s profit numbers were helped by various U.S. government electric vehicle-making credits it was able to sell to other car manufacturers totalling $69 million, down from $85 million in the first quarter.
But investors clearly have faith in Tesla’s huge ambitions, as sales expand from the U.S. to Europe and Asia.
“Order flow for the Model S in North America remains at 20,000 annualised and Tesla is now talking about expectations of at least 40,000 units of demand by late 2014, once European and certain Asian markets are opened up,” said Deutsche Bank analyst Dan Galves.
Tesla has said it will start production of its Model X SUV based on the current S next year. Its mass market “Gen III” vehicle should be launched before the end of 2016.
Morgan Stanley’s Jonas summed up the reasons for the scramble into Tesla’s shares, an how this may be spooking the likes of BMW, Mercedes, and Audi.
“Elon Musk is writing the book on how to build an auto manufacturer in the 21st century. This is happening, and it’s real. Just ask the competition,” said Jonas.
Tesla supporters see it throwing a spanner in the works of the current industry with its successful use of batteries which has so far eluded traditional manufacturers.