Tesla Earnings: We Beat Expectations, and Everything’s On Track

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Aside from being one of the only new automakers to emerge on the scene in the last several decades, Tesla Motors is also one of the most hotly contested equities on Wall Street.

Bulls on the company are all about the promising future: production ramps, expanding margins, and the capacity that the American market still holds for gasoline-to-electric car conversions. The bearish side argues that the company, which offers one product (for now) and has so far only sold fewer than 50,000 units of it annually in its history, is quite undeserving of the colossal $29 billion market cap current on its head.

As it is still in its relative infancy, no detail of Tesla’s quarterly reports are safe from investor scrutiny. Whether it’s the money it takes in from powertrain sales, sales of its zero-emissions credits, or its sold-versus-produced philosophy, Tesla’s stock is among the most volatile on the Nasdaq.

After revealing that it sold more than 10,000 units in the first quarter of this year, Tesla’s stock leapt, and year-to-date, TSLA is trading up by about 5.4%, though it’s spent most of the last four months in the red since its 2015 trading debut.

Source: Tesla

Notably, this year has so far been full of firsts. Tesla waded into the home energy market with the Powerwall, a battery-powered, grid-free solution for both homes and businesses. It launched the S70D, which bumped out the 60-kilowatt model as the brand’s entry-level offering. It also started selling used Tesla models through its website. With so many chips in the air, let’s see how the they landed in the first quarter.

The company’s quarterly report, released Monday, gave a more intricate window into Tesla’s performance for the first months of 2015. During the period, the Fremont, Calif.-based upstart moved 10,045 Model S cars, as sales were buoyed by the updated S70D and further encouraged by the ridiculously quick P85D. The company beat analyst expectations for earnings per share of -$0.36 by $0.14. Revenue of $939.9 million, though up 51.5% year-over-year, fell $100.1 million short of expectations.

Cars produced reached 11,160, and despite the strong U.S. dollar, the company was quick to point out that it met its gross margin target for the quarter. It also pointed out that deliveries of the Model X SUV was still on track to begin late in the third quarter.

Tesla didn’t say a whole lot about China, a recent rough patch for the company after a bumbled rollout resulted in far less demand than originally anticipated. “While we still have work to do in China, we saw encouraging signs of a return to growth in orders there as well,” Tesla said, adding that it still sees continued Model S demand elsewhere.

Source: Tesla

Production came in at 10% over guidance estimates, and due to the company’s ability to “[implement] efficiency improvements and reduced labor hours by more than 20% per car by the end of the quarter,” the factory is running smoother and quicker. This will likely have a more material impact down the line, when Tesla is rolling off Model S sedans, Model X SUVs, and Model 3 compacts simultaneously.

But those plans hinge on the success of the Gigafactory, the enormous plant Tesla is building with Panasonic in the Nevada desert to produce the batteries required to churn out all those vehicles. Fortunately, construction on the factory is well underway, and Tesla remains committed to shipping batteries from the site next year.

The major announcement this quarter, though, was of Tesla Energy and the Powerwall home battery system. This represents the first diversity in Tesla’s product lines away from automobiles, and the products should begin flowing from the Fremont plant in the third quarter, with a significant ramp to the EU, Australia, and throughout North American in Q4.

Overall, here’s the down and dirty: $51 million was made selling zero-emissions credits. Losses were less than expected, an impressive feat given the strength of the dollar and the amount that Tesla is pouring into R&D. Guidance for 55,000 vehicles delivered this year remains attainable, including sales of the Model X SUV. In all, it was a very productive quarter, and Tesla should be setting itself up well for when its physical constraints catch up with its tenacious investment capacity.