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Tesla and the Curious Case of Elon Musk

Stocks in this article: TSLA

Updated from 11"04 a.m. with thoughts from Bank of America Merrill Lync analyst.

NEW YORK (TheStreet) -- Tesla Motors (TSLA) reports first-quarter earnings after the close on Wednesday, and Wall Street will be looking to hear updated plans on the Gigafactory, the company's fights with various states, and whether demand for the Model S is still as healthy as CEO Elon Musk and team claim it to be.

When Tesla reported fourth-quarter earnings, Tesla said it expected to deliver 35,000 Model S units in 2014, up 55% year over year. For the first quarter, Tesla expects to produce around 7,400 Model S units, but would only deliver 6,400 of them due to the high number of cars in transit to both Europe and Asia. The company noted that battery cell supply will continue to be a constraint in the first half of 2014, but that will "improve significantly in the second half of 2014."

Furthermore, first-quarter gross margins should increase "very slightly" from the fourth quarter, but are expected to improve throughout the year. Non-GAAP gross margins during the quarter were 25.2%.

For the fourth quarter, Tesla earned 33 cents a share on $761 million in revenue as it delivered 6,892 Model S units.

Analysts surveyed by Thomson Reuters are expecting Tesla to earn 10 cents a share in the first quarter on $699.09 million in revenue.

In light of the company's recent battles with state legislatures, analysts are sure to question whether the company's direct sales model is sustainable over the long haul, or whether Musk and company will need to rethink their strategy in order to make the market for electric vehicles as large as they want. In April, Tesla was banned from selling directly in New Jersey, following a very public battle with N.J. Gov. Chris Christie (R.) and his administration.

Shares of Tesla were down sharply in trading on Wednesday, falling 2.7% to $201.63. 

Tesla was able to avoid the same outcome in Ohio, where it can sell direct to consumers in its two stores in the state, one based in Easton and the other in Cincinnati. Not only can Tesla sell directly to consumers in its two existing stores but Tesla also is allowed to open a third store in Cleveland. As per the agreement, Tesla is the only automaker allowed to operate its own stores in the state.

In addition to the company's problems with its sales model in the U.S., Tesla in February announced preliminary plans for the Gigafactory, which is designed to help cut lithium-ion battery costs and boost production to 500,000 cars per year by 2020.

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