NEW YORK – Until yesterday it appeared that shares in TESLA (NASDAQ:TSLA) were headed in one direction, up. However, that changed on Tuesday when the company reported their third quarter earnings results. While Tesla was able to narrow their third quarter loss compared to the same period a year ago, guidance for the fourth quarter was disappointing and shares fell more than 10 percent in after-hours trading.
For the third quarter, the company reported that they lost more than $ 38 million on revenues of $ 431 million. In the third quarter of 2012, the company lost $ 111 million on revenues of $ 50 million – this was the same quarter that the company started delivering their all-electric Model S to showrooms.
According to Telsa’s founder and Chairman, Elon Musk, ‘we really are production-constrained, not demand-constrained.’ The company delivered a record 5,500 Model S cars in the third quarter, including more than 1,000 to European customers; however some analysts predicted higher sales.
The reaction from Wall Street was swift as shares plunged from $ 176.81 to $ 158.60 in after-hours trading. The company also noted that they intend to increase spending on research and development by 25 percent as they gear up for the release of the Model X sport utility vehicle and with plans to update the Model S. According to Karl Brauer, a Kelley Blue Book analyst, ‘as an automaker with shares trading well above mainstream car companies like G.M. (NYSE:GM) and Toyota (NYSE:TM), Tesla’s appeal is based as much on image and reputation as hard financial numbers.’
Nevertheless, Tesla is gaining ground and company CFO, Deepak Ahuja, wrote
‘Over 19,000 Model S owners are driving in excess of 700,000 miles per day in over 20 countries and have now driven their cars more than 100 million miles. As more people see our car on the road, take a test drive, or talk with another Model S owner, more demand is created for our product.
The company is also working on expanding their network of service centers and supercharging stations and they plan to increase production to keep up with demand for the $ 69,500 Model S. The Model S is the best-selling new car this year in eight of the 25 wealthiest ZIP codes in the United States, according to the industry researcher Edmunds.com. However, the company suffered two prominent fires last month when metal debris pierced one Model S’s battery pack and a high-speed crash punctured another.
Given shareholder reaction to the quarterly reports and the increased scrutiny that the company is facing over battery safety it might be a good time to hold off on Tesla until the share price stabilizes.