Tesla – the company or shares – has always been a polarizing factor. Faithful believers in the company's ecologically sustainable electric car production mission, as established by Tesla & founder and CEO Elon Musk, have fought for years with non-believers who view the company as unhealthy and his CEO as a false prophet who is a unrealistic promise.
Markets tend to buy the dream. That is until recently, when Tesla & # 39; s supply battle escalated and the behavior of Elon Musk became more and more incomprehensible.
Tesla (NASDAQ 🙂 is set to report first quarter earnings on Wednesday, April 24, after the closing bell. Consensus expectations for revenue are $ 5.77 billion, with a loss of $ 0.87 per share. However, Tesla & # 39; s income is often unreliable. Musk and his company love creative accounting to achieve certain goals in certain neighborhoods, often when Musk promises that Tesla will have a profitable quarter. For a more accurate picture of the actual situation of the company, production and delivery numbers are much more impressive than the income statement.
Nuclear mission still to be reached
A utopian future powered by renewable energy and electric cars has always been an important part of the core of Tesla. And it is the power of Musk & # 39; s skill as a visionary to be able to convince investors as beautifully as an improbable dream could become a reality under his guardianship. Thirteen years ago, in August 2006, Musk unveiled his master plan on the company blog:
"Build a sports car. Use that money to build an affordable car. Use that money to build an even more affordable car"
The hard facts? It took Tesla 10 years to even shape Musk's plan. The company eventually produced a few cars that were sold for $ 80-120K before the Model 3 was introduced in March 2016 for $ 35,000.
To secure a spot on the Model 3 waiting list, it was reported that 500,000 people were willing to deposit a deposit of $ 1,000 each, raising $ 500 million for Tesla.
With thanks to Bloomberg
The only problem? Tesla is still unable to meet its production targets – the company has so far delivered only 218,000 cars.
Musk said in 2017 that the company has the & # 39; production hell & # 39; had come across and it still is. Deliveries lag behind the estimates of both Wall Street and Tesla. In the first quarter of 2019, the car manufacturer delivered 63,000 vehicles, 27,000 fewer than in the last quarter of 2018. Tesla accused this miss of challenges related to delivering cars to Europe and China.
It is not that Tesla does not understand that it is stuck. It is bloated and awkward and has debts. It has $ 33.7 billion in contractual obligations on its balance sheet, including $ 2.5 billion in debts to be repaid in 2019, with another $ 2.5 billion in 2020. Over the past few months, the company has made redundancies , considering closing stores, lowered prices to raise them again after just three weeks.
Also, on January 1, Tesla lost its federal tax credit on EV vehicles because they sold more than 200,000 cars according to the IRS. This effectively increases the price per car for customers without putting more money into the company's own pockets
Tesla has a whole series of challenges to overcome, both from a financial and production perspective. Given that Tesla remains a non-profitable operation, it will most likely need external capital about a year later.
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There are more immediate brewing problems for the already heavily troubled manufacturer of electric cars: since the beginning of 2019, the shares of the Palo Alto-based car manufacturer have fallen 17.8% compared to a profit of 16.5% for the same period.
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Of course, the share of Tesla, which closed yesterday at $ 263.90, of 31.8% over the 52-week high, has always been more volatile than most, but a gap of 34% in just four months between his performance and that of the S & P is simply amazing. To close this gap, Musk has redistributed its proven method of breathing life into Tesla stock: sell even greater dreams.
Greater promises, More sound
The newest lofty promise: a fleet of on-demand, self-driving Tesla taxis. Two weeks ago, Musk claimed that Tesla & # 39; everyone is greatly anticipating & # 39; when it comes to autonomous vehicles. He even went so far that he fully predicted driving for Tesla vehicles by next year at the latest. Last Monday, Tesla organized a presentation for analysts and investors who presented their capabilities and launched plans for this & # 39; robotaxi & # 39; network in 2020.
Would Tesla be worth $ 50 billion if it was the first and only manufacturer to deliver self-driving cars in the very near future? Absolutely.
Will it be that manufacturer? Unlikely. More than 60 companies, including Google (NASDAQ 🙂 Waymo, the French automobile consortium Renault (PA 🙂 and the Japanese Nissan Motor Co (OTC 🙂 are already working on self-driving capabilities. And although Waymo successfully placed a blind man behind the wheel of one of its autonomous cars in Austin, Texas in 2016, Waymo's fully self-driving cars are not commercially available. In addition to our skepticism, the CEO had already promised in 2015 to deliver self-driving vehicles within two years
In the meantime, it should be clear that Musk's statements must be viewed with extreme caution – they are intended as distraction, creating smoke and noise that will distract investor focus from Tesla's disappointing performance at all levels. Believing in Musk has always been a crucial part of being a long-term Tesla investor.
Monday's presentation was not planned two days earlier than Tesla's Q1 2019 earnings by accident. Musk knows that blunder and great promises have always stimulated Tesla's appreciation. The more promises he breaks, the closer he brings Tesla to his breaking point. Given how the markets have treated Tesla in the last four months, Musk should enter very carefully.
