Tesla: Squeeze, Bull Trap, Hangover?

Tesla
Model 3, © Tesla

Profit from 2017‘s first quarter was less than persuasive, as minus USD 1.33 per share (before extraordinary items/losses) was a much higher fall than the, on average, USD 0.81 in loss analysts had expected. First-quarter net loss added up to around USD 330 million. That revenue grew strongly by 69 per cent (compared to the same quarter last year) to USD 2.7 billion is a positive. Because of the mood on the stock exchange – which remained optimistic after the latest figures were published – prices rose to more than USD 325 (is this the short squeeze I expected?) and the market cap temporarily shot up to USD 53 billion, surpassing Ford’s.

Tesla (NASDAQ: TSLA) touted its first-quarter sale of more than 25,000 vehicles as a big success and is certain that it can get Model 3 ready for the market on time, in smaller volumes from July and at more than 5,000 units per week late this year. In 2018, the number is planned to rise to 10,000. What is curious, though, is that the corporation intends to skip the important beta test – a stage that is typically used to detect possible issues with new models and correct them before a car enters series production. Is it due to the ambition of Tesla head and visionary Elon Musk?

The first Model 3 vehicles will reportedly be tested by Tesla’s employees. Are they going to be the guinea pigs? Why not take the normal route? To save time?

Unfortunately, there was no update on the number of reservations for the new model at a deposit of USD 1,000 each. Analysts think it is likely that many potential buyers would want to use the option to get the federal income tax credit of USD 7,500 per vehicle. But what if the 200,000-unit threshold for grant approval is exceeded and the tax credit void?

Tesla is reportedly more than USD 8 billion in debt compared to USD 4 billion it has in cash and cash equivalents, plus an increasing number of supplier credits going into billions. This means that more capital raises are very likely, especially considering the launch of Model 3.

Goldman Sachs believes the stock …

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Visionary founders of Tesla and SolarWorld – any parallels?

Could SolarWorld and Tesla or, more to the point, their founders, respectively Frank H. Asbeck and Musk, have something in common? German stock market magazine Der Aktionär tried to find an answer to that question in a May 2017 article and has found some similarities between those two, namely their visions, behavior and communication style. And both “make a lot of noise” to cover up weak spots in company operations, it seems …

Last: Analyst Adam Jonas from Morgan Stanley downgraded his rating on May 15, 2017, to neutral. He now expects a capital demand of USD 3.1 billion in 2017 (previously: USD 2.3 billion) and the corporation being in the red until the end of 2019. The last point should be seen in comparison with other, rather optimistic opinions held by analysts who believe Tesla could already turn a small profit this year and forecast generous profit margins in the coming years due to Model 3 and successful developments in power storage (SolarCity & Powerpack).

Risk warning

Investors must understand that buying and selling shares is done at their own risk. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they do not represent stakes in big companies and the volatility is significantly higher. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the assessments put forth in this article represent exclusively the author’s own opinion. This article focuses on mid-term and long-term perspectives and not short-term profit. The author may own shares in any of the companies mentioned in this article.

Author: Sven Jösting, written May 2017

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