The Holy Grail for a car company is to make a high-performance, all-electric vehicle that’s cool to own with both the green set, and the car-guy enthusiast set. Enter California automaker Tesla Motors Inc. (NASDAQ:TSLA). I count myself among the enthusiast group, although my work with Tobin Smith on Billion Dollar Green afforded me an opportunity to dig deep into the clean-tech wave.
Now, in the interest of full disclosure, I have a friend who owns a Tesla Roadster, and another friend who actually works for the company. I’ve driven a Tesla, and I must say the car is quite the silent rush as you accelerate from 0 to 60 mph in under 4 seconds with little more than a high-pitch hum. However, what is even more impressive to me is Tesla’s not-so-silent share price surge.
Click to Enlarge Tesla stock is up 53% since it plunged to its Jan. 13 year-to-date low. One look at TSLA’s chart shows the big January selloff that was followed by even bigger buying. So, what caused such a volatile voltage swing in such a short period?
The selling started after news leaked that two key engineers working on the company’s new Model S sedan had unexpectedly resigned. That put a fright into traders, who understandably saw the situation as a potential Solyndra scandal in the making. According to my source at Tesla, the resignations were definitely not unexpected — but unfortunately, the Street didn’t get the memo.
Realizing that he had to address the issue, Tesla’s genius CEO Elon Musk, the man who created PayPal, took steps to correct the record after the shares plunged. Initially, Musk and his PR team simply said the news of the two engineers’ resigning were no big deal. Of course, it was a big deal to traders, and Musk’s initial words failed to placate Wall Street.
That’s when Tesla took the bull by the proverbial horns by holding an hourlong call with financial media and analysts to set the record straight. Apparently, that worked quite well, and the share price surge ever since is evidence of just that.
More importantly for the long-term success of the company was the recent earnings report. Last week, Tesla reported a wider-than-expected loss for its fourth quarter of 69 cents per share; however, the company beat on the top line with revenue of $39.4 million, much better than the $37.6 million the Street was expecting.
The company also announced it was in development with other automakers to develop new models. German luxury automaker Daimler (PINK:DDAIF) has a deal with Tesla to produce an electric Mercedes-Benz that uses the Tesla power train. Toyota (NYSE:TM) also has a deal with Tesla to develop an electric version of the Japanese automaker’s RAV4 model.
The bottom line here is that Tesla is trading higher on expectations for future revenue from partnerships, as well as future sales of its Model S sedan and its Model X SUV. Already, the company has seen big-time sales interest in each, with buyers already plunking down up to $5,000 just to reserve the Model S, and $4,000 to have first dibs on the Model X.
If Tesla can continue to prove its ability to keep selling its all-electric vehicles, we’re liable to continue seeing TSLA shares retain their charge for some time.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.