PALO ALTO -- Shares of Tesla Motors (TSLA) leapt to an all-time high Monday after the electric-car maker said it would show a quarterly profit for the first time in its 10-year history -- and Wall Street expects even more good news Tuesday.
The announcement about the company's financial performance puts to rest, for now, those who questioned Tesla's ability to sell enough cars to create a viable business, especially as other automakers report disappointing EV sales and one, Fisker Automotive, is looking for partners to keep operating.
"You've got new investors who want exposure to Tesla once it becomes profitable, and now that's happening," said Andrea James, vice president and senior research analyst with Dougherty & Co. "I expected them to do well, but they are doing even better than expected, so that's good."
Adding to the hype surrounding the company, Tesla CEO Elon Musk has been tweeting out cryptic hints of another big announcement Tuesday and -- following Tesla's positive stock performance -- wrote on Monday that "the Tues news is arguably more important."
Possibilities include an announcement by Musk that he is taking an even greater stake in the company by bankrolling a leasing program, which is currently unavailable in North America and could conceivably further drive consumer demand; or Musk's funding of a supercharger network to address the range limits on electric-vehicle batteries.
"Anytime a CEO is willing to put more skin in the game, investors like to see that," said Ben Kallo, a senior research analyst at Robert W. Baird.
Road to profitability
Tesla was founded in 2003 and five years later launched its Roadster, advertised as the world's first fully electric sports car. By 2010, the company had bought the former NUMMI factory in Fremont and had become the darling of Wall Street when its supercharged initial public offering saw its $17-a-share stock price skyrocket on the first day of trading.
While Tesla finally has turned a profit, its long-term future remains in doubt as it tries to carve out a high-end niche among giant automakers that have bigger bank accounts, larger distribution networks and vastly more resources.
Jack Nerad, executive market analyst for Kelley Blue Book, believes that Tesla's best hopes lie with the possibility that it will some day be absorbed by a competitor while retaining its distinct niche and brand, similar to the Fiat Group's acquisition of Ferrari.
Tesla has "quality management and visionary engineering and they do a lot of things right," Nerad said. "But it's hard to imagine how they can ever compete against the giants."
Late Sunday, Tesla announced that it sold more than 4,750 Model S sedans this quarter, surpassing its own expectations of 4,500 units.
It also amended its guidance for its first-quarter results to "full profitability," sending its shares as high as $46.68 in Monday's trading before closing at $43.93, or up 15.9 percent from Thursday, an all-time high. It will report full financial results for the quarter on May 9.
"They set sales expectations to the point where they gave themselves some room," Baird said. "But there were a lot of question marks whether they could reach profitability. There are going to be hiccups in any new company creating new technologies. So far they've been able to manage them as small hiccups, with nothing really big."
Nerad, of Kelly Blue Book, hopes Musk announces "a battery breakthrough that changes the whole ballgame," such as cheaper batteries or ones that can be recharged much faster.
The Model S had been available with three battery-pack options that offer roughly 160, 230 or 300 miles per charge. But Tesla announced Sunday that it is scrapping production of the 160-mile version due to lack of demand.
For the long term, Nerad wants to see Tesla's sales numbers rise much higher.
"The true test is what a model does in its second year in the marketplace, what it does in the third year in the marketplace and what it does in the fourth year in the marketplace, not what it does in the first year," Nerad said. "Nobody has really quite cracked the nut of a high-volume pure-electric vehicle. That's what the Model S was supposed to do, or at least come close. Instead, it's evolved into a much higher-priced, lower-volume sedan status."
Staff writer Jeremy C. Owens contributed to this report. Contact Dan Nakaso at 408-271-3648. Follow him at Twitter.com/dannakaso.
A Tesla Timeline
2003: Martin Eberhard and Marc Tarpenning cofound Tesla.
2004: Tesla begins development of its first electric vehicle, the Roadster.
July 2006: Tesla unveils the design for the Roadster.
March 2008: After delays, regular production of the Roadster begins.
October 2008: Elon Musk becomes CEO.
March 2009: Tesla unveils the design for its second car, the Model S sedan.
May 2009: German auto company Daimler acquires a stake of nearly 10 percent in Tesla worth $50 million.
January 2010: The company files to go public with an offering worth $100 million.
March 2010: The company relocates from San Carlos to Palo Alto.
May 2010: Tesla spends $42 million to buy the former NUMMI factory in Fremont, where it plans to build the Model S sedan and future Tesla vehicles.
June 2010: Tesla Motors goes public with an offering worth $226.1 million.
February 2012: Tesla shows off the prototype of its Model X, a battery-powered SUV scheduled to begin production in 2014.
June 2012: Tesla begins delivering the Model S sedan to customers.
Sunday: Tesla says it will show the first quarterly profit in its 10-year history.
Monday: Tesla shares soar nearly 16 percent on the news.
Source: Mercury News research