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Tesla Earnings Preview: Is the Juice Still Flowing? (Update 1)

Updated from 9:08 a.m. ET to include comments from Deutsche Bank analyst in the ninth paragraph.

NEW YORK ( TheStreet) -- Tesla Motors (TSLA - Get Report) is set to report first-quarter earnings after the close of trading Wednesday and, while the stock has been on a wild ride in recent months, it could be poised for more volatility as the nascent electric car industry continues to grow.

The Palo Alto, Calif.-based Tesla pre-announced earnings in late March, saying it would be profitable for the first quarter but it didn't disclose earnings figures. The company announced sales of its Model S vehicle have exceeded the target provided in mid-February, as the company sold more than 4,750 Model S vehicles in the first quarter, up from a previous outlook of 4,500 cars.

Analysts expect Tesla to earn 4 cents a share on $499.55 million in revenue, according to analysts polled by Thomson Reuters.

Tesla shares have been on fire this year, gaining nearly 64%. With such a sharp run-up in shares and the company reporting it would be profitable on both a non-GAAP and GAAP basis, that run could continue, said Jefferies analyst Elaine Kwei.

Kwei noted that still a large portion of the float, 46% of shares, is held short. "While it's difficult to quantify how much more pain could be inflicted on the shorts, we think there's still a long way to go given that the short interest has yet to come down significantly," Kwei wrote in her report. She rates shares "buy," and upped her price target to $68 from $45.


The analyst noted that CEO Elon Musk has continued to generate positive momentum in recent weeks, with new announcements. Musk has talked about services (allowing companies to use the Tesla Roadster and upgraded Model S vehicles while their car is being serviced) and financing. The latest bit of positive news is Musk has recently had discussions with Google (GOOG - Get Report) on auto-piloted cars, though the Tesla CEO noted that development was still years away.

Tesla shares were rising in early Wednesday trading, up 2.5% to $56.90.

One thing investors will be looking at are the company's gross margins, both for the first quarter and in its guidance. The company has provided a target of 25% gross margins for this year, but fourth-quarter margins were below 8%, a far cry from the company's stated goal for 2013. When Tesla pre-announced in late March, it said it expected gross margins will be in the mid-teens, ultimately rising toward 25% in the second half of the year.


Deutsche Bank analyst Rod Lache is more cautious on the stock than Kwei, with a $35 price target on shares. He notes that regulatory credits will be a close metric to watch in the first quarter, as regulatory credits represented $35 million in gross profit in the fourth-quarter. "We have no visibility on Q1 reg credits, but incorporate $40MM in our model, which would equate to approximately 41% of est'd gross margin and $8,400 per unit," Lache wrote in his note.

Tesla has had its fair share of detractors, as well as its fair share of fans, as it seeks to revolutionize the electric car. With shares near record highs on strong momentum and a path toward profitability, let's see whether Tesla can put its foot on the gas, or whether the stock might be stuck in neutral for a while.

-- Written by Chris Ciaccia in New York

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