Telsa (TSLA) is down 5% after reporting first quarter results last night. The stock is still above where it broke out to new highs after the company reported deliveries up 69% to a new record in early April.
Revenue and deliveries hit a record but the company reported a larger than expected adjusted net loss. Gross margin upside was aided by Enhanced Autopilot revenue but the second quarter gross margin is expected to contract.
Delivery guidance for the first half of 2017 was reaffirmed at 47-50K units, which implies 22-25K deliveries in the second quarter.
So what gave the Bears some gasoline today, other than some elevated expectations with the stock near its all-time highs? Well, Tesla did not disclose order growth like it normally does and it seems that confusion about the Model 3 being the next-generation Model S (not a cheaper mainstream version) has impacted recent demand for the Model S. Tesla is in the process of clearing up this confusion and Elon Musk remains confident that there is demand for the 100K Model S/X production target for 2017. To the Bears' detriment, Tesla has never had an issue with demand, so maybe the company deserves the benefit of the doubt. Net orders were up 52% year-over-year and 24% sequentially in the fourth quarter last year.
Elon Musk also acknowledged something on the call that was already pretty obvious. Shareholders should expect more dilution. Mr. Musk said Tesla can grow at a moderate pace with no dilution, fast with some dilution and very fast with more dilution. With plans for a crossover Model Y after the Model 3, a semi-truck, a pick up and a next-generation roadster, we can assume that very fast with more dilution is in the works for Tesla.
For now, it's all about the Model 3. Tesla is on track for initial production in July, a ramp to to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018.
Tesla has a ~$50 billion market cap, on par with GM (GM) and higher than Ford's (F). Traditional valuation metrics on the automakers' financials don't just tify this reality. Tesla's valuation reflects its plans to change the transportation industry as we know it.