Tesla Motors Inc share price down, second-quarter outlook disappoints despite steady first-quarter results

Tesla Motors Inc fell by more than 7% in after-hours trading on Wednesday after the electric vehicle makers second-quarter outlook disappointed some investors, who were impatiently awaiting clearer evidence of the companys future development.

The car makers stock settled nearly 3% lower on the NASDAQ and extended its fall in after-market trading despite a better-than-expected first-quarter earnings report, which showed the company is on track to reaching its internal goals for its Model S sedan.

Tesla Motors, led by billionaire Elon Musk, delivered 6 457 Model S cars during the first quarter, with a large number of vehicles currently on their way to China, which however will be included in the current quarters results. This exceeded the companys forecast of 6 400 sales, but trailed the fourth quarters record of 6 892. The auto maker, however, reiterated its full-year sales target of more than 35 000 cars and its expectations for a jump to 7 500 vehicles in the second three-month period.

Also on the bright side, Teslas operating revenue rose by 27% in the three months through March to $713 million, compared to Wall Street analysts projections for a jump to $700 million. Net revenue was up 10% from a year earlier and reached $621 million.

Pro-forma earnings were at $17 million, or 12 cents per share, 2 cents above expectations. However, on a net basis, Tesla marked a $49.8-million loss, compared to a $11.25-million profit a year ago. As expected, the company received no revenue from zero-emission vehicle credit sales, while a year earlier it gained $67.9 million in the category.

Tesla said its operating gross margins in the second quarter would increase slightly, which was a disappointment in investors eyes, sending its shares tumbling. Mr. Musk admitted on Wednesday that its next vehicle to come, the Model X crossover, has slipped behind schedule, but it was nevertheless expected to enter production phase in the second quarter next year.

The companys shares have fallen by almost a fourth since their record-high in mid-February amid the broader correction in high-growth stocks, coupled with investors fears whether Tesla will meet its optimistic targets.

The electric car maker said its production capacity has been increased by 15% from the previous quarter to 700 units per week. It conceded, however, that slow battery supply will curb production in the second quarter, but output should accelerate in the the three months through September and is expected to reach 1 000 vehicles by the end of the year.

Elon Musk sought to reassure investors and analysts yesterday that the project to build a lithium-ion cells plant in the US, dubbed “the gigafactory”, is moving ahead of planned and production should start in 2017. Tesla will begin work at two sites in two different states simultaneously in order to diminish risks of falling behind schedule, before deciding which to ultimately choose. The states in focus are Arizona, Texas, New Mexico, Nevada and possibly California.

Musk announced the company has signed a letter of intent with Panasonic, which would produce lithium-ion batteries at the factory, but was still in talks with other potential partners. The Japanese company would be the only one producing batteries at the plant, but that doesnt exclude deliveries from its own plants, as well as other companies.

Investors also eyed Teslas entry into the China. Tesla expanded into the Chinese market in April, where it intends to open a new plant in the next three to four years in order to meet the strong demand. As much as 1 000 vehicles are currently on their way to China, the worlds biggest auto market, where gauging future demand is crucial for the companys outlook.

Robert W. Baird analyst Ben Kallo said, cited by Bloomberg: “It’s an important market (China) going forward, but it’s still building up and the fourth quarter is when we’ll see some nice deliveries there.”

Tesla Motors Inc. fell by 2.86% on Wednesday to close the session at $201.35 per share. The stock fell further in after-hours trading, slipping to $186.60. The electric car maker is valued at $24.98 billion. According to CNN Money, the 14 analysts offering 12-month price forecasts for Tesla Motors Inc have a median target of $220.00, with a high estimate of $325.00 and a low estimate of $75.00. The median estimate represents a +9.26% increase from the last price of $201.35.