This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Tesla's Future Is Now

Stocks in this article: TSLA HMC TM F GM

Updated from 9:01 a.m. EST to provide analyst comments in the seventh paragraph.

NEW YORK ( TheStreet) -- The thesis on Tesla Motors (TSLA) changed again last night. Now, the question for investors isn't whether the electric-car manufacturer can be profitable, it's just how profitable it can be.

Tesla, led by CEO Elon Musk, earned 5 cents a share during its second quarter, generating $405 million in sales. The Model S continues to blow past the wildest expectations of industry observers as global deliveries surged in the three-month period to 5,150 units for the quarter.

In contrast, analysts were expecting a loss of 17 cents a share on $383.4 million in revenue for the second quarter.

Not only is the company now profitable (albeit on a non-GAAP basis), gross margins continued to tick up. For the quarter, gross margins were 22%, 13% when you exclude Zero Emmissions Vehicles (ZEV) credits. The company has stated that its goal is 25% and CEO Elon Musk emphasized that he's confident about getting there.

"Obviously, on average between Q3 and Q4, we need to do six points per quarter, so we need to make as quite as big an improvement as we did Q1, Q2, but obviously, so significant hill to climb and huge amount of work, but we feel pretty confident about the 25% number," Musk said on the conference call. "And, it's important to note that we have visibility into these numbers more than ahead of time."

Not only is Tesla profitable for the second time in its history, as the Model S continues to be supply constrained, Tesla is taking market share from all manufacturers not just premium sedans. Both Musk and CFO Deepak Ahuja noted Tesla's customers are coming from Toyota Motors' (TM) Prius, the Mercedes E-Class, the Toyota Highlander, Volkswagen Jetta, Honda Motors' (HMC) Civic and Odyssey and the BMW 5 Series, to name a few.

It's important to note that Tesla is not just taking share from premium sedans. People who never thought they would be purchasing a $70,000+ sedan are moving towards the company's products. This affects all automakers, including American behemoths such as Ford Motors (F) and General Motors Motors (GM).

In a research note, Jefferies analyst Elaine Kwei, who raised her target price to $160 from $130, noted that investors " c ouldn't have asked for a better report" as the company beat on every metric. "TSLA posted a 2Q beat on all key metrics including deliveries, margins, and earnings," Kwei wrote in the report. "TSLA delivered 5,150 Model S vehicles in North America, with a gross margin of 22%, and was profitable on a non-GAAP basis. TSLA reiterated 2013 shipment and margin guidance but hinted at expansion past 25%."

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs