Tesla's Earnings: What Wall Street's Saying (Update 2)

Updated from 10:56 a.m. EST to provide Bank of America comments.

NEW YORK (TheStreet) -- Tesla Motors (TSLA) shares were sinking 16.2% to $148.10 following an earnings report that didn't quite live up to Wall Street's expectations.

Palo Alto, Calif.-based Tesla reported third quarter earnings that actually beat Wall Street estimates, but there were concerns over deliveries of Model S units for this quarter and the next as well.

Tesla earned 12 cents a share on $603 million in revenue, as the company delivered 5,500 Model S units during the quarter. Gross margins, excluding Zero Emission Vehicles (ZEV) credits were 21% during the quarter, getting closer to the company's goal of 25%.

Analysts surveyed by Thomson Reuters were expecting Tesla to report earnings of 11 cents a share on $534.64 million in revenue.

Concerns about the deliveries for the fourth quarter weighed on shares, as CEO Elon Musk acknowledged the company's supply constraints. "The main constraint on our production is really is the cells, and I think I have mentioned that before in talks and I think I alluded on that on prior earnings call, so we were addressing the cell supply constraints and any sort of constraints that are non-cell constraints that exist, but the critical thing is the cell production constraints," Musk said on Tesla's earnings call.

Tesla expects to "deliver slightly under 6,000 Model S vehicles in Q4, which increases our total expected deliveries to 21,500 vehicles worldwide for 2013."

Despite the poor reaction in the stock, most analysts were pretty positive on Tesla following the results, noting that the company has a high-class problem, as it's not able to keep up with demand. Here's what a few of them had to say.

Jefferies analyst Elaine Kwei (Buy, $210 PT)

"TSLA's 3Q results beat consensus on revenue and non-GAAP EPS, and deliveries of 5,500 exceeded guidance. A wide range of expectations ahead of the report may have resulted in some disappointment, but in our view, 3Q marked another quarter of remarkable progress since volume deliveries of the Model S began one year ago."

Morgan Stanley analyst Adam Jonas (Overweight, $153 PT) "Tesla's 3Q results, while good enough to keep the bull thesis of 'America's Fourth Automaker' well intact, were not strong enough to raise consensus expectations near term. For a momentum stock up 400% YTD, TSLA deserves a modest correction."

S&P Capital IQ analyst Efraim Levy (Sell, $140 PT)

"We lower our target price by $10 to $140. We reduce our '13 EPS estimate $0.36 to $0.04, largely on higher research and selling, general and administrative expenses expected in Q4. We cut our '14 EPS estimate by $0.07 to $1.46. Our target price equates to 96X our '14 estimate that we apply based on the more the 220% compounded annual growth we expect over the next four years (from a small base). We view Tesla as a leader and innovator with strong growth prospects. However, with earnings now reported, we do not see a major potential near-term upside catalyst for the shares."

Bank of America analyst John Lovallo (Underperform, $45 PT)

"We continue to believe meaningful execution challenges remain for TSLA and that the shares are vastly overvalued. Also, it is becoming increasingly evident to us that retail
investors could be caught holding the bag as the shares correct (see Mom, Pop, & the Gen 3 dream, given that institutional ownership has consistently declined in 2013."

Deutsche Bank analyst Dan Galves (Buy, $200 PT)

"TSLA made significant progress in Q3, delivering 5,500 units (vs DBe 5,300 and 5,150 in Q2), increasing gross margin to 21% (ex ZEV's) vs. DBe 20% and 14% in Q2, and posting positive FCF of $25MM (vs DBe $1MM). Mgmt reiterated their target of 25% gross margin (ex ZEV's) in Q4 (and projected higher levels beyond that). Implied Q4 earnings guidance of $0.12 was slightly below Cons on R&D / SG&A expense ramp, but we now believe they will do ~$0.19 due to strong Avg Trans Prices. We are maintaining 2014 / 2015 est's of $2.10 / $4.25 and reiterating Buy on valuation."

TheStreet's Jim Cramer:

"Production constrained, not demand constrained. That's Elon Musk's excuse for the miss in Tesla Motors' numbers.

But you know what, there's no room for any defects here, even the high-quality defect of too many customers and not enough product. They don't have enough batteries? Shouldn't they have figured that out? That's what the sellers are saying. Hey, when you are paying $21 billion for a car company that makes 5,000 cars when people were looking for that amount, and the company didn't make more because of mistakes made, that's a reason to cut and run."

--Written by Chris Ciaccia in New York

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