Tesla Surges Following Q3 Report: What Wall Street's Saying

NEW YORK (TheStreet) -- Tesla Motors (TSLA) shares rose following strong third-quarter earnings and an outlook for the next few years that says the company may grow 50% per year for the "foreseeable future."

Tesla earned an adjusted 2 cents a share on $932 million in revenue, as it delivered 7,785 Model S units during the quarter. Analysts surveyed by Thomson Reuters expect the company to lose an adjusted 1 cent a share on $889.28 million in revenue.

Must Read: How Tesla's Production Woes Are Hurting Growth Near Term

For the full year, Tesla said it expects deliveries to be around 33,000 units, due to "the complexity of launches related to dual motor and autopilot hardware. Consequently, we expect to deliver approximately 33,000 vehicles for 2014." Tesla cited a deficit in production of 2,00 units in the third quarter. The company had previously forecast that it would deliver 35,000 units in 2014.

The company did note that previous projections for 2015 are unaffected.

Palo Alto, Calif.-based Tesla also said that it expects to earn an adjusted 30 to 35 cents a share in the fourth quarter, with diluted shares expected to be between 143 million and 145 million.

Tesla stated that the Model X would be pushed back to the third quarter of 2015, as it works to get Alpha and Beta prototypes and testing complete.

"We recently decided to build in significantly more validation testing time to achieve the best Model X possible," CEO Elon Musk said in the shareholder letter. "This will also allow for a more rapid production ramp compared to Model S in 2012. In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla -- we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change."

On the earnings call, Musk said, "We feel very confident with 50,000 Model S vehicles a year."

Musk continued, "It's probably more than that, but that's the number we're confident in. There are other macroeconomic factors that play into it, so difficult to be for certain, but 50,000 is a number we're pretty confident even if economies aren't great in certain parts of the world."

Musk also touched on the prospects of raising capital, saying the company may not need to raise any more money until the Model 3. "If there was something we could think of to spend money on without being wasteful we would, but it's quite hard."

Shares were surging in early Thursday trading, gaining 5.6% to $244 as of 10 a.m., following the earnings and conference call.

Following the report, Wall Street analysts were largely positive on the company's 2015 prospects and efforts to get its production issues under control. Here's what a few of them had to say.

Must Read: Tesla Q3 Live Blog Recap

JPMorgan analyst Ryan Brinkman (Neutral, $190 price target)

"What is more, three issues emerged during the quarter which together serve as a reminder of what seems at times like underappreciated execution risk: (1) Production challenges in 3Q -- Following planned downtime at Tesla's Fremont facility, it took longer than expected to ramp to the targeted rate of production, given 'system integration challenges,' thereby reducing production by 2,000 units; (2) Production challenges in 4Q -- Production is expected to be constrained by 'the complexity of launches related to dual motor and autopilot hardware'; and (3) Product development and validation challenges -- The Model X has been delayed several months, to 3Q15. TSLA guides 4Q non-GAAP operating expense and capital expenditure modestly higher than our estimate, indicating potentially softer FCF. The saving grace to outlook is management appears to have: (1) overcome the issues plaguing 3Q production even if (2) some further work remains in 4Q to reach the run-rate guidance; and (3) TSLA still guides to 2K/week run-rate of production by 2015-end, indicating outlook for 2016 is protected (and, indeed, our out-year estimates are largely unchanged, as is valuation). At a minimum, however, we believe one proper takeaway from 3Q results is this company has its work cut out for it to achieve the ambitious goals it set for itself, let alone very high investor expectations."

Deutsche Bank analyst Rod Lache (Buy, $310 price target)

"Tesla's margin performance was somewhat weaker than we expected during Q4 (due to manufacturing inefficiencies related to their recent expansion), they guided Q4 deliveries a bit lower (also due to these inefficiencies), and they indicated that Model X will be launched a bit later than previously disclosed (though this was largely known as customers' order confirmation emails have been indicating a Fall 2015 launch). Nonetheless, the longer term outlook for Tesla does not appear to be changing materially. We maintain our Buy rating based on valuation."

Credit Suisse analyst Dan Galves (Outperform, $325 price target)

"Our long-term view has not changed: We are maintaining our Outperform rating and $325 price target, which is based on 20x our view of late-decade EPS of $25, discounted back 3 years. We see Tesla as having sustainable competitive advantage in an industry where that is very rare, which will lead to very higher demand. And we believe profit margins can be meaningfully higher than luxury OEM peers, due to 1) Capturing ~50% of the 10 points of margin that luxury OEM's give up to their dealers, and 2) Once Tesla achieves cost-parity with Internal Combustion Vehicles (by late in the decade if not sooner), Tesla should be able to price their vehicle at a premium due to the $1,000-$2,000 per year in fuel and maintenance savings."


--Written by Chris Ciaccia in New York

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