Tesla Motors Inc. (NASDAQ: TSLA) was incorporated on July 1, 2003. By May 2006, the company had reached its Series C funding round, which raised $40 million. By the end of that round, only $60.5 million dollars had been raised for the startup.
Tesla did not actually begin production of automobiles until March 18, 2008, when it commenced manufacturing the sold-out 2008 quota for 900 of its small Roadster models.
Tesla Goes Public
Tesla did not go public until its initial public offering (IPO) in June 2010, at $17 per share. After the IPO pricing was announced on June 28, 2010, 13.3 million shares hit the NASDAQ trading floor on the following day, when the stock reached a high of $25 before finishing the session at $23.89. After retreating to a closing price of $15.85 on July 7, 2010, the stock proceeded to grind higher despite Tesla’s string of quarterly losses.
On April 1, 2013, Tesla reported its first quarterly profit since the company went public. The company disclosed that sales of its Model S vehicle exceeded the 4,500-unit target provided in its mid-February 2013 shareholder letter. First-quarter vehicle deliveries (sales) exceeded 4,750 units. As a result, Tesla amended its first-quarter guidance to full profitability, even when using generally accepted accounting principles (GAAP). The news sent Tesla’s share price skyrocketing 15.94% to end the session at $43.93. After April 15, 2013, this stock gained extraordinary momentum. Its intraday high of $194.23 on Oct. 1, 2013 was more than four times as high as its closing price on April 1 of that year. However, on Feb. 19, 2014, Tesla reported a net loss of $74 million during fiscal year 2013.
Reality Rears Its Head
After reaching a record intraday high of $291.42 on Sept. 4, 2014, this stock crossed below its 200-day moving average within three months. On Dec. 17, 2014, Morgan Stanley (NYSE: MS) lowered its sales outlook for the company, anticipating that Tesla could not reach its 2020 sales target of 500,000 units. Instead, Morgan Stanley anticipated a total of only 297,000 Tesla vehicles sold by 2020.
On Feb. 11, 2015, Tesla reported a net loss of $294 million during fiscal year 2014. The disappointing news sent its share price falling 4.66% to $202.88 on Feb. 12, 2015. The stock price plunged despite the fact that during the Feb. 11 earnings conference call, Chief Executive Officer (CEO) Elon Musk stated that Tesla could be worth $700 billion by 2025. As of that date, the company had a market capitalization of approximately $25 billion. Musk based his conjecture on the assumption that the company could increase its sales by 50% per year for the next 10 years. Musk apparently chose the number $700 billion because that amount was the approximate market capitalization of Apple Inc. (NASDAQ: APPL) at that time.
Another Wave of Hope
Tesla’s earnings report for 2015 indicated a loss of $888 million for the full year. Just before the report’s release on Feb. 10, 2016, Tesla shares reached their lowest closing price in two years. The company’s fourth-quarter earnings of negative 87 cents per share on revenue of $1.75 billion severely missed analysts’ estimates of 11 cents per share on revenue of $1.80 billion. Despite the earnings disappointment, the company’s delivery of 17,478 vehicles during fourth-quarter 2015, combined with its announcement of a planned delivery of 80,000 to 90,000 vehicles during 2016, sparked a wave of bullishness. Tesla’s share price jumped 4.73% to $150.47 on Feb. 11, 2016. The ensuing rally brought sustained momentum for this stock. By April 6, 2016, Tesla’s share price had soared 84.74% since the release of its 2015 annual earnings report.
On March 31, 2016, Tesla unveiled its Model 3 and began taking orders. During the first week, the company received over 325,000 reservations at a cost of $1,000 each. The Model 3 has a starting price of $35,000. The company expects to begin deliveries on the new model in late 2017. Elon Musk explained that the Model 3 might not be as opulent as the Model S. Instead, the Model 3 is intended to compete with the Audi A4 and the BMW 3-Series.
Elon Musk’s first-quarter 2016 earnings call on May 4, 2016 provoked a backlash of criticism from analysts. The company reported a less-bad loss of 54 cents per share on revenue of $1.6 billion, compared to analysts’ estimates of negative 60 cents per share on revenue of $1.6 billion. However, Musk moved the company’s 500,000-vehicle production target from 2020 to 2018. This provoked a chorus of skepticism. Morgan Stanley’s analyst, Adam Jonas, described the new target as higher than any bullish case he was prepared to model.