Why Tesla Motors (TSLA) Stock Is Down Today

NEW YORK (TheStreet) -- Tesla Motors  (TSLA) plunged Thursday after the electric automaker reported first-quarter revenue that came up short of analysts' expectations and announced a possible earnings dip later in the fiscal year.

Revenue rose 10% to $620.5 million in the quarter but was well short of the $683.5 million estimate from analysts polled by FactSet. Tesla's net income of 12 cents a share beat analysts' estimate of 8 cents a share.

Tesla also said in its report that reinvestment in the company would drag down earnings later in 2014, while free cash flow would be negative for the remainder of the fiscal year because of $650 million to $850 million in capital spending for increased production capacity.

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The stock closed down 11.3%, or $22.76, to $178.59. More than 18.6 million shares changed hands, which more than doubled the average volume of 9,094,450.

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Separately, 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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TSLA's very impressive revenue growth greatly exceeded the industry average of 6.8%. Since the same quarter one year prior, revenues leaped by 100.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.33, which illustrates the ability to avoid short-term cash problems.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Automobiles industry and the overall market, TESLA MOTORS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 31.56%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.64% trails the industry average.
  • You can view the full analysis from the report here: TSLA Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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