Tesla Soars as Model S Exceeds Targets (Update 2)

Tickers in this article: TSLA
Updated from 10:03 a.m. EDT to provide analyst comments regarding profitability in the seventh paragraph.

NEW YORK (TheStreet) -- Last week, Elon Musk tweeted Tesla Motors had big news. The announcement Monday about the company being profitable isn't it, but it's big news to Wall Street as the stock is soaring on this news.

Tesla announced Monday that sales of its Model S vehicle have exceeded the target provided in mid-February, as the company sold more than 4,750 Model S vehicles in the first quarter, up from a previous outlook of 4,500 cars. As such, the company raised its first quarter outlook to "full profitability" on a non-GAAP and GAAP basis. Tesla had previously said it expected to be "slightly positive net income, on a non-GAAP basis. We also expect to be near breakeven on cash flow from operations." It expected gross margins will be in the mid-teens, ultimately rising toward 25% in the second half of the year.

Barclays Capital analyst Brian A. Johnson noted the announcement should put to rest the concern about the company's profit potential.

"In our view, while we had expected profitability in 2Q13, turning the corner on profitability should put to rest some of the market concerns around profit potential after soft gross margin performance in 4Q12," Johnson wrote in a note. He rates shares "overweight" with a $38 price target.

"I am incredibly proud of the Tesla team for their outstanding work. There have been many car startups over the past several decades, but profitability is what makes a company real. Tesla is here to stay and keep fighting for the electric car revolution," said CEO Musk in a press release.

The company also announced that the small battery for the Model S will not go into production, citing a lack of demand. The customers who chose the 40 kWh battery pack will now receive the 60 kWh pack, but the software will be limited to 40 kWh and can be upgraded upon request. Also of note, the company announced that all 60 kWh cars have been and will be built with Supercharger hardware included.

Following the announcement, Musk tweeted that the news coming out Tuesday "is arguably more important." Jefferies analyst Elaine Kwei believes that given the hype surrounding Monday's announcement as well as the upcoming news, she expects "a high level of media attention over the next several days and correspondingly higher levels of activity in the stock."

Tesla shares were jumping in early Monday trading, up 20.93% to $45.82.

--Written by Chris Ciaccia in New York

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