Tesla outlook disappoints some on Wall St, shares drop 7 percent

Wed May 7, 2014 8:21pm EDT
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By Ben Klayman

DETROIT (Reuters) - Tesla Motors Inc (TSLA.O: Quote), led by billionaire Elon Musk, on Wednesday offered an outlook for the second quarter that disappointed some investors, sending shares of the electric car maker down more than 7 percent in after-hours trading.

Tesla posted a higher-than-expected first-quarter operating profit and said its operating automotive gross margins in the current quarter would increase slightly. S&P Capital IQ analyst Efraim Levy called the outlook a disappointment, saying investors had hoped for something better.

The Palo Alto, California-based company reported a first-quarter net loss of almost $50 million, compared with its first quarterly profit a year ago.

Tesla said it would spend up to $850 million this year to boost production capacity of its Model S luxury electric sedan, develop the Model X crossover vehicle and start construction of a new lithium-ion battery plant, dubbed the "gigafactory." It said that would leave the company with a negative free cash flow for 2014.

Like other so-called momentum stocks, Tesla's shares have fallen recently and at the close of the market on Wednesday were down more than 20 percent from an all-time high of $265 in mid-February. In after-hours activity, Tesla shares traded at $186.60, after closing at $201.35.

The company said the project to begin production of lithium-ion batteries at the gigafactory is on course for 2017 and the plant should reach its full production rate in 2020.

"We have not yet finalized the ultimate location for the gigafactory and we are going to start work on at least two locations in parallel in order to minimize risk of delays arising after groundbreaking," Musk said in a letter to shareholders posted online.

He later said on a conference call with analysts that the company would break ground at the first location probably next month, followed by the second site one to two months later.   Continued...

A Tesla Motors Inc Model X is seen at Tesla's introduction of its new battery swapping program in Hawthorne, California June 20, 2013. REUTERS/Lucy Nicholson