Tesla Motors Inc 2014 Guidance Will Matter More Than 4Q Earnings

Tesla Motors Inc 2014 Guidance Will Matter More Than 4Q Earnings
Blomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) earnings are coming on Wednesday, but with prices already soaring in anticipation investors will either see their hopes realized or be disappointed – it’s hard to imagine there is any room for earnings to be the market’s bullish consensus – but guidance for the next two years is what will matter most. Tesla is expected to report earnings of 19 cents per share on $656 million in revenue for 4Q2014.

Tesla’s stock price reflects high expectations

Tesla Motors Inc (NASDAQ:TSLA)’s stock price went up following rave reviews from Christian von Koenigsegg of the Swedish automaker Koenigsegg Automotive, who said the Model S handled better than the BMW M5, news that sales in China were going well, and high pre-orders for the Model X due out by the end of 2014, so the stock price jumped because investors are more confident about Tesla’s plans for expansion, not because they have higher expectations for last year.

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If guidance for 2014 is raised to meet those expectations than Tesla’s stock price should stay stable or rise a bit more, but heavy optimism is already priced in. The bigger concern is if Tesla, which has previously described itself as supply constrained not demand constrained, will be able to expand operations to meet rising demand in the US, Europe and now China.

Look for new details on the Model X, Model E

Tesla Motors Inc (NASDAQ:TSLA)’s Model X is already generating buzz, and as a high-end automobile it could drive revenues and help Tesla compete with other luxury brands, so more information about the exact price point and other details. While it’s still too early for anything concrete, Tesla might give firmer guidance about when to expect the Model E, an economy class model that could be coming out in 2016 or 2017. Until Tesla has an economy car on the market it will have a hard time competing directly with the largest auto manufacturers. By market cap, Tesla is currently worth about half as much as General Motors. For that comparison to make sense, Tesla Motors Inc (NASDAQ:TSLA) can’t confine itself to wealthy technophiles forever.

New developments on battery production and expanding Tesla’s network of charging stations could also be important, since both make it more feasible to own an electric car without worrying about traveling long distances or going far out of your way to recharge.

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