Tesla shares drop as earnings fall short

DETROIT Shares of electric car maker Tesla Motors (TSLA) tumbled in after-hours trading Tuesday after the automaker's third-quarter results fell short of expectations.

Tesla said it sold just over 5,500 of its Model S sedans in the July-September period, which was a record for the automaker but lower than some analysts had predicted. Barclays analyst Brian Johnson, for example, had expected Tesla to deliver 5,820 cars during the quarter.

In a conference call after its earnings release, CEO Elon Musk said the company's production has been constrained by its battery supplies, but that should ease next year thanks to a recent deal with Panasonic Corp. that increases battery shipments to Tesla.

"It doesn't make sense to amplify demand if we can't meet that demand with production," Musk said. "We have to figure out how to ramp up faster."

Tesla also invested heavily in its network of U.S. and European charging stations and in opening new stores. The company's development costs increased as it prepares for next year's planned launch of its Model X crossover.

Tesla lost $38.5 million, or 32 cents per share, in the third quarter. Its revenue jumped to $431 million, up 6 percent from the second quarter and up from $50.1 million in the July-September period last year.

That was far short of the $547.5 million forecast by analysts, according to FactSet. Analysts had been expecting earnings of 8 cents per share.

On a non-GAAP basis, Palo Alto, Calif.-based Tesla beat expectations, with earnings of $16 million, or 13 cents per share, on revenue of $602.5 million. Tesla prefers non-GAAP to GAAP - or generally accepted accounting principles - because of the way the company accounts for leasing. Tesla's lease program allows it to get all of the money for the cars it leases up front, but GAAP rules require the money from a lease to be spread out over the course of the lease term.

The quarter was a disappointment for Tesla's investors, however, who have sent its stock up more than 400 percent this year as the company finally became profitable and the Model S became a critical success. The $70,000 Model S, which can go up to 300 miles on a battery charge, is Tesla's only vehicle on the market right now.

The automaker's shares fell nearly 12 percent to $156.41 in after-hours trading Tuesday.

In a letter to investors, Musk said the company's retail stores and service centers expanded by 20 percent during the quarter to more than 100. He also said the company is rapidly expanding its network of free Supercharger stations, with 31 now open in North America. Supercharger stations allow Tesla owners to charge half their battery in 20 minutes. Tesla now has enough Supercharger stations for free travel between San Diego and Vancouver, and it wants to have enough stations for cross-country driving in the U.S. by the end of this year.

The company said it plans to deliver 6,000 Model S sedans in the fourth quarter, for total sales of 21,500 this year. That's up from 2,650 sales in 2012, when the Model S went on sale.

But again, it fell short of some expectations. Johnson, of Barclays, had expected shipments of 6,600 Model S sedans in the fourth quarter.

Musk said the company remains on track to begin selling the Model S in China in the first quarter of next year.