A sample text widget

Etiam pulvinar consectetur dolor sed malesuada. Ut convallis euismod dolor nec pretium. Nunc ut tristique massa.

Nam sodales mi vitae dolor ullamcorper et vulputate enim accumsan. Morbi orci magna, tincidunt vitae molestie nec, molestie at mi. Nulla nulla lorem, suscipit in posuere in, interdum non magna.

Gross Margins And Model S Sales Will Drive Tesla Results

Tesla Motors is scheduled to announce its Q1 earnings on May 8. The stock has been on fire lately after CEO Elon Musk announced that the company will be profitable for the first time ever, and so the market seems to be eagerly waiting to see how big the bottom-line will be. Turning profitable is a crucial milestone in the progress of a company that is still in its early days. Tesla’s full year losses widened to $396 million last year from $254 million in 2011.

In April, the automaker also announced that it had managed to sell 4,750 Model S cars in the quarter, exceeding its own guidance of 4,500 at the start of the year. Since most of the top-line is generated from the sale of Model S cars, this is one of the key items to watch.

See full analysis for Tesla Motors

There have been other positive developments for the company although they’ll not have much impact on the first quarter numbers. Tesla unveiled a new leasing program for its Model S in which the company will assume the risk associated with the residual value of the car. That certainly mitigates any apprehensions of potential buyers about the resale value of the vehicle. Since the Model S is a relatively new car, its hard for customers to estimate how much the car will sell for in around two to three years’ time.

Margins Are Critical

Watch out for the gross margins. The automaker is extremely confident of achieving gross margins of 25% by the end of the year. The corresponding figure stood at a tepid 8% in the fourth quarter of 2012, but that was largely because of disruptions in Model S production, which impacted its top-line negatively. While the fixed costs remained more or less the same, revenues were naturally short of what they should have been and that is the reason why they were lower than expected. This time, expect the margins to expand significantly, although how close they are to the target level of 25% is yet to be seen.


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.