Tesla's Smooth Road to Glory

NEW YORK ( TheStreet) -- Tesla Motors ( TSLA) may have reported mixed results Wednesday night, but one thing is clear: The company has a plan to continue to deliver. If Tesla can deliver on its plans, it'll take a smooth road to get there.

Tesla reported a fourth-quarter non-GAAP loss of 65 cents a share on $306 million in revenue. Analysts were looking for a loss of 53 cents a share on $298.2 million in revenue. However, with Tesla it's important to look at 2013, and especially 2014 demand for the Model S, as production ramps up and cost-efficiencies come into place.

Demand is strong for the Model S, CEO Elon Musk said on the conference call. "We have enough reservations to fill out the year, and just on shear momentum, sell every car we make, even if we close every car." For 2013, Tesla expects to deliver about 20,000 Model S units, with 4,500 of them in the first quarter.
Model S

Tesla expects first-quarter gross margins to be in the mid-teens and rise toward its target of 25% in the second half of the year. "We really have very high confidence that we will have a profitable first quarter," Musk said on the earnings call.

Deutsche Bank analyst Dan Galves said he believes that as volume rises (the company noted it has virtually no sales in Europe and none in Asia), this could be a huge boon for sales, and thus the stock price. "If volume were to reach 40k-45k units, a 10x multiple would imply a share price of $51-$64," Galves wrote in a note. He rated Tesla "hold" but upped his price target to $35.

Tesla appears to be on a much firmer footing as 2013 kicks into gear (pun intended), than it was in 2012. The company is now producing 400 cars per week, and Musk noted that it could be as much as 500 cars per week, but operational costs would make that ineffective now. As operating efficiencies improve, 400 units per week could move up. That should improve gross margins, which Tesla has indicated will be 25%.

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Tesla said that it recorded 6,000 new reservations in the fourth quarter, indicating demand is incredibly strong for the Model S. That's more than double its previous high of 2,900.

Maxim analyst Aaron Chew noted despite the $102 million in cash spent during the quarter, the recent price hike and cost controls could bode well for the stock. "Despite losses and $102m in cash burn, we expect higher utilization and cost controls to yield 25% gross margin and GAAP profitability by 4Q13. With better visibility/confidence in demand, we expect the stock to soon hit new highs," Chew wrote in a note.

In addition to first-quarter guidance, Musk touched on the second quarter. He wouldn't commit to a profit in the second quarter but noted on the conference call he thinks "we'll be profitable in the second quarter and subsequent quarters as well." With Musk being so confident about the rest of 2013, that may bode well for investor optimism in Tesla's ability to execute.

--Written by Chris Ciaccia in New York

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