Tesla Inc (NASDAQ:TSLA) on Wednesday reported a wider-than-expected first-quarter loss that has the bears feeling a little energetic. However, the 1%-plus dip in TSLA stock on Thursday morning — as well as any other short-term snag — should be treated as a buying opportunity for investors waiting for anything resembling a better entry point.
Depending on who you ask, Tesla delivered a solid quarter. Not surprisingly, though, the bears continue to find tons of holes in the business model, despite the company’s posting Q1 revenue that surged 135% year-over-year.
TSLA stock — up 45% year to date through Wednesday’s close — had a strong run heading into the company’s first-quarter earnings report. So this pullback, which looks more like a product of growth fatigue, should not worry the bulls.
The long-term thesis remains in play.
Tesla Drives Higher Margins
For the three months that ended March, the Palo Alto, California-based electric car maker reported a non-GAAP net loss of $214.9 million or $1.33 per share, which missed estimates for a 77-cent loss. Total revenue of $2.696 billion, however, topped Street forecast of $2.61 billion.
Notably, TSLA posted automotive revenue of $2.28 billion, which rose 15% sequentially and 123% year-over-year.
Just as impressive, automotive gross margins came in at 27.4%, marking an improvement of 480 basis from the fourth quarter, while expanding 340 bps year-over-year.
The gross margin improvement underscores the extent to which CEO Elon Musk has begun to focus on profitability. This is even as the company, which just past both Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) in market cap, is ramping up production to match its larger rivals in vehicle sales.
To that end, TSLA noted that facilitates for Model 3 production are on track to produce 5,000 vehicles per week at some point in 2017. And the company continues to promised it can double that rate to 10,000 per week in 2018.
And, of course, there’s still the hyper-competitive autonomous car market where Tesla is spending to keep pace with Alphabet Inc (NASDAQ:GOOGL), Uber and Apple Inc. (NASDAQ:AAPL). In that regard, Tesla, which reiterated its guidance for first-half deliveries of 47,000-50,000, sees no signs of slowing down. However, the company did note it would update its outlook on vehicle deliveries after the start of Model 3 production in July.
Elon Musk has drawn criticism for the company’s high cash burn. But the narrative has begun to change. And while TSLA continues to spend money building facilities and investing in the future, the company has begun to realize value and significant returns on those investments. Take, for instance, its first-quarter delivery beat in April.
Tesla also has topped its delivery forecast in two of the past three quarters.
Bottom Line for TSLA Stock
Tesla shares closed Wednesday’s trade at $311.02, or 34% higher than when I recommended the stock back in January. And with Tesla seemingly operating on all cylinders, there’s now increased confidence that the company not only can deliver on Model 3 production estimates, but also boost demand for the Model S and Model X in the quarters ahead.
TSLA stock is a solid buy on this earnings dip or any other short-term snag.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.