Tesla Motors: Should You Buy?

Tesla Motors (TSLA) announced fourth quarter ended December 31, 2015 total adjusted revenue of $1.75 billion, an increase of 59 percent year-over-year from $1.10 billion during the same period last year and up 41 percent sequentially from $1.24 billion in third quarter of 2015.

Tesla Motors declared fourth quarter of 2015 adjusted net loss of $113.9 million or $0.87 of diluted loss per share compared to non-GAAP net loss of $75.0 million or $0.58 of diluted loss per share in the third quarter of 2015 and adjusted net loss of $16.2 million or $0.13 of diluted loss per share during the fourth quarter of 2014.

The automobile manufacturing company reported continued sequential and year-over-year growth in its top line primarily driven by the expanding company sales for the quarter.
However, Tesla’s bottom line suffered both sequentially and year-over-year due to unfavorable foreign currency translations that occurred all through the quarter.

Impressive growth

Tesla Motors illustrated robust operating cash flows for the quarter both sequentially and year-over-year particularly allowed by notable cost-optimization initiatives being undertaken by the key motor company which is believed to position it strongly for significant and sustainable long-term growth while delivering attractive shareholder returns. Moreover, Tesla Motors is leading the global list of large luxury vehicle sales in the US with over 51 percent year-over-year expansion in 2015 vehicle sales compared to last year while all its key competitors witnessed continued decline in year-over-year vehicle sales that highlight Tesla’s superior vehicle production and sales capabilities.

During the fourth quarter of 2015, Tesla Motors grew its worldwide vehicle deliveries by over 76% and primarily driven by notable market share gains achieved for the company’s S model in all the major geographic areas. Tesla’s model S uniquely captured a majority of market share in the US in just three years post introduction in the market and became the top-selling model with attractive and competitive pricing among other vehicle manufacturer’s four-door sedan.

The global car manufacturer’s impressive cost-optimization efforts coupled with expanding production capability has enabled it to deliver significant operating cash flows for the quarter despite the ongoing weakness in global demand for new vehicles.

The automobile company’s share-price grew nearly 15 percent to about $164.90 in lengthened trading post the advanced electric-car manufacturer Elon Musk’s key estimates for international deliveries to enhance approximately 78 percent during this year. Further, the vehicle delivery outlook for the quarter which was recorded in the range of 80,000 to 90,000 vehicles, surpassed the key analyst’s average vehicle delivery estimate of 76,200.

In addition, Tesla Motors targets on opening approximately 80 key retail locations with service centers and inaugurate nearly 300 strategic Supercharger sites with a notable assurance to the key investors about launching the compact and low-priced Model 3 car on March 31, 2016.

Strong opportunity

The fiscal year 2016 projected international car sales is believed to reach 74.39 million units, up 3 percent year-over-year from 72.37 million units sold in 2015. This consolidated growth in global vehicle sales is expected to be achieved from significant sales expansion contributions from Asia, North America and Western Europe, somewhat offset by net sales declines witnessed in Eastern Europe and South America.

Tesla Motors is continuing to grow its year-over-year vehicle sales with attractive near-term sales outlook despite the ongoing tough and weaker global demand environment for new electric technology vehicles that highlights the company’s operational excellence, positioning it for sustainable long-term growth while delivering attractive shareholder returns.

The global 5-year automotive industry growth projection from 2013 till 2018 is expected to remain solid and expanding, given the continuously rising world population and steadily improving living standards of people encouraging them to spend lavishly and own their own vehicle thus, benefiting the key automobile manufacturer.

Conclusion

Overall, the investors are advised to “Hold” their position in Tesla Motors, Inc. considering the company’s attractive long-term growth outlook but a currently weaker financial position with significant total debt of $2.92 billion against weaker total cash position of $1.20 billion only, restricting the company to make future growth investments. The profit margin of -21.96% signifies no profit but loss. However, the PEG ratio of 2.11 suggests healthy company growth compared to weaker industry’s growth average of 0.56 only.
Published on Apr 12, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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