Tesla Motors Inc (NASDAQ:TSLA) reported a 4Q12 adjusted operation EPS loss of about $(0.65), below consensus of $(0.53). GAAP EPS of $(0.79). The number included $14.4mm of non-cash stock compensation expense and an approximately $1mm charge attributable to the change in fair value of DOE warrant liabilities. Total 4Q revenue of $306mm was just above estimates, but was more than offset by a lower than modeled gross margin of 7.8% and higher than expected R&D and SG&A. Investors believe meaningful challenges lie ahead for Tesla Motors Inc (NASDAQ:TSLA) and expect demand for electric vehicles to remain tepid until technology evolves and consumers are not forced to pay a premium or sacrifice convenience. Shares of Tesla Motors Inc (NASDAQ:TSLA) are currently down 8.6% on the disappointing earnings.
Analysts at BAML are downgrading Tesla Motors Inc (NASDAQ:TSLA) not based on results but rather due to valuation. Analysts at BAML note:
Due to the recent run-up in Tesla Motors Inc (NASDAQ:TSLA)’s stock price, the shares are now trading well above what we estimate as fair value. In fact, TSLA’s 2/20 closing price of $38.54 implies a 2014e EV/EBITDA multiple of ~13.8X and an EV/Sales multiple of ~1.7X our forecasts, both of which appear excessive. As a result, we are lowering our rating on TSLA shares from Neutral to Underperform, while maintaining our $30 PO, based on a 2014E EV/EBITDA mult. of ~10.4X and an EV/Sales mult. Of ~1.4X. We note that following a softer than expected 4Q12, we are also lowering our 2013e EPS from $0.30 to $0.10, but maintaining our 2014e of $1.80. We continue to view TSLA as an interesting story, but believe significant execution risk exists as volumes ramp. Furthermore, we see better opportunities for share price appreciation and return of capital with other companies in our coverage.
On the positive side: 4Q production in line; cash usage reduced significantly. 4Q was an inflection point in TSLA’s transition to manufacturing, with the company exiting the quarter at full production in excess of 400 cars per week. Production totaled over 2,750 Model S units in 4Q and over 3,100 in 2012. Deliveries of 2,400 vehicles were slightly below the low end of prior guidance due to holiday vacations; these were likely caught up early in the new year. Deliveries for the year were approximately 2,650. Cash used in operations fell to $28.8 million in 4Q from $95 million in 3Q and TSLA went cash flow positive in the quarter. Non-GAAP EPS was ($0.65) vs. consensus of ($0.57). Revenue of $306 million beat consensus of $300 million.
Analysts at Jefferies note that Tesla Motors Inc (NASDAQ:TSLA) added more than 6,000 new reservations in 4Q, up from 2,900 in 3Q. Reservations benefited from pull-ins ahead of a price increase that took effect January 1. New reservations for Tesla Motors in January and February are below December’s pace, but are tracking above 3Q. They estimate cancellations in 4Q were roughly 1,600; 1Q cancellations are expected to remain elevated as would-be buyers are asked to configure and convert reservations to nonrefundable orders. During 4Q Tesla Motors opened eight new stores in the U.S. and Toronto, bringing the total to 32, and plans to open 15 to 20 more in 2013 (with half located in Europe and Asia) that should drive new demand, in the analysts’ opinion.
