NEW YORK (TheStreet) -- Tesla Motors
(TSLA - Get Report) shares are climbing, up 1.35% to $265.55 in early market trading on Monday, after CEO Elon Musk announced that the electric vehicle maker would be extending the warranty on its Model S sedan to eight years and unlimited miles.
The announcement may be a response to consumer magazines Edmunds and Consumer Reports' negative review of the long-term durability of the company's most popular sedan.
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However, both magazines reported that the flaws they experienced after a year of heavy driving were repaired under the company's old four year, 50,000 mile warranty at no additional cost.
Musk admitted that the extended warranty, which applies retroactively to all Model S previously sold, would have a "moderately negative effect" on the company's earnings in the short term in a statement released on Tesla's website Friday.
TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TSLA's very impressive revenue growth greatly exceeded the industry average of 23.0%. Since the same quarter one year prior, revenues leaped by 89.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, TSLA's share price has jumped by 87.55%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- TESLA MOTORS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TESLA MOTORS INC continued to lose money by earning -$0.71 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus -$0.71).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 102.9% when compared to the same quarter one year ago, falling from -$30.50 million to -$61.90 million.
- The debt-to-equity ratio is very high at 2.57 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full analysis from the report here: TSLA Ratings Report