Tesla (TSLA 314.59, +2.38, +0.76%)
shares rose last week after the company reported its second straight quarterly
profit on Wednesday, January 31.
This morning, the company announced the acquisition of Maxwell Technologies (MXWL 4.57, +1.50, +48.86%) in an all-stock deal worth ~$200 mln. Maxwell is a leader in energy storage and power delivery solutions whose dry electrode manufacturing technology makes ultracapacitors to help the manufacturing of batteries. So, this is a strategic deal for Tesla to bolster its manufacturing capacity.
Last week, Tesla narrowly missed fourth quarter earnings estimates, but revenue growth was in the triple-digits for the second straight quarter amid exponential growth in production and deliveries of the Model 3.
Tesla captured 80% of the electric vehicle market in 2018 as the Model 3 became the best-selling passenger car in the US in terms of revenue in the second half of the year.
Tesla guided for deliveries to grow 45-65% to 360,000-400,000 electric vehicles in 2019, which was toward the low end of expectations. The company noted that the expiration of the US EV-tax credit pulled forward some demand in the fourth quarter, which has skeptics once again questioning demand. Tesla also warned of a softer first quarter.
However, the company will begin delivering the Model 3 to Europe and Asia this quarter. Tesla said there is still a large reservation backlog but did not update that figure. It seems many are holding out for a $35,000 option. Tesla said that could be available mid-year. The company also announced cost cuts in order to achieve the economies of scale to produce a $35,000 option profitably.
On the call, Elon Musk narrowed its demand estimate for the Model 3 to 700-800K per year (in a good economy). He said a factory in Shanghai is going up rapidly and will start producing the Model 3 by year end. What's more, Model Y crossover production could start early next year. Elon Musk also said Tesla could unveil the pickup design this summer.
At the end of the earnings call, Tesla announced that CFO Deepak Ahuja will retire again. He came back for a second stint at a Tesla a few years ago, so his departure doesn't come as a big surprise, but the ongoing turnover among management at Tesla does raise some eyebrows. Incoming CFO Zach Kirkhorn has been at Tesla for nine years.
Fourth quarter results did seem to put to rest concerns over the balance sheet after the company reported GAAP profitability and positive free cash flow for the second consecutive quarter.
Still, Tesla remains one of the most controversial stocks in the market. Bulls see Tesla transforming the transportation sector while bears remain skeptical of Elon Musk's lofty goals and the robust valuation, among other things.
With a ~$54 bln market cap, Tesla trades at ~50x EPS estimates, 16x EV/EBITDA and ~2.3x sales. Tesla is expected to grow operating profit nearly 500% to $2 bln with sales up 35% in 2019.
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