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Published on July 11th, 2019 | by Carolyn Fortuna

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Tesla’s Reinvigorated Fiscal Picture Has Short Sellers Scrutinizing Their Outlooks

July 11th, 2019 by  


The Tesla fiscal situation seems to be on the rebound.

On July 02, 2019, the Tesla, Inc. 2019 Q2 production and deliveries totals were released. The company achieved record production of 87,048 vehicles and record deliveries of approximately 95,200 vehicles. In addition, the company made significant progress streamlining their global logistics and delivery operations at higher volumes, enabling cost efficiencies and improvements to their working capital position.

Production : Tesla Model S/X 14,517 + Model 3 72,531  = Total 87,048

Deliveries: Tesla Model S/X 17,650 + Model 3 77,550 = Total 95,200

Tesla shares are up 4.6% in the past week on the strength of better-than-expected second-quarter production and delivery numbers, which Tesla expects to increase in this quarter.

But will the Tesla short sellers believe the positive forecast? The initial rally wasn’t sustained, with shares losing half of their post-announcement gains by the end of the week. Will short sellers continue their doom and gloom scenarios? Estimates for the full year and for 2020 also appear to be quite subdued.

Many in the financial media and on Wall Street discount Tesla, even though the all-electric car company has what it takes to surpass legacy automakers and other EV competitors with its longevity in the EV business, expertise with battery evolution, Gigafactories in the US and abroad, innovative approaches to marketing — and so much more.

Photo of Tesla Sydney showroom by Carolyn Fortuna, CleanTechnica (available for use anywhere if credited)


2020 Tesla Fiscal Projections

Tesla acknowledged that certain statements contained in the July 1 letter, including statements regarding expected future vehicle deliveries and production, are “forward-looking statements” that are subject to risks and uncertainties. Many in the financial press seem to hold that Tesla stock continues to deserve little more than pessimism, with periodic claims that Tesla shares have been oversold.

Others aren’t quite so sure. In fact, a new slew of opinions seem to say that Tesla stock is on the comeback and likely to continue to rise in value.

Perhaps the internal email to employees dated July 9 from Jerome Guillen, president of automotive at Tesla, shifted some perspectives. Guillen said the company is “making preparations” to raise output at its factory in Fremont, California. “I know you will be delighted with the upcoming developments,” Guillen predicted, adding that the company has “hit new records in all production lines for output and efficiency” in the most recent quarter, both in Fremont and in Nevada, and that “quality is also reaching record highs.” Nevada is home to Tesla’s Gigafactory 1, which produces battery cells as well as many motor and drivetrain components.

If in fact the Nevada factory begins volume production in the fourth quarter of this year as Tesla expects, Tesla could produce more than a half million electric cars this year, projects CleanTechnica‘s own Steve Hanley.

Tesla likely pulled third- and fourth-quarter demand forward into the second quarter to beat consensus delivery estimates, Morgan Stanley analyst Adam Jonas said in response in a July 8 note. Tesla exceeded Morgan Stanley’s second-quarter delivery estimate by 13,622 units, so Jonas lowered the third-quarter deliveries estimate by 6,500 to 91,300 and the fourth-quarter estimate by 7,200 to 97,200.

Adam Jonas’ Position on Tesla: Hold | Price target: $230.00 | Action: Reiterated

Morgan Stanley dropped its Tesla year-over-year revenue growth estimates by -3% in the third quarter and -2% in the fourth quarter due to negative impacts from model mix shift and margin erosion. “While we still expect near-term volatility in the stock to be driven by real-time data points around demand in the US and the international market for Tesla’s electric vehicles, we also expect discussions around the nature and value of the company’s technology to be an important part of the narrative going forward,” Jonas said. So, it’s not what you sell in the short term but what you know about technological applications for the future that makes all the difference, eh?

CNN Business has compiled a list of the 31 analysts who offer 12-month price forecasts for Tesla. They have a median target of $237.00, with a high estimate of $530.00 and a low estimate of $140.00. The median estimate represents a +3.57% increase from the last price of $228.82.

Who is right here?

The Tesla second quarter earnings report will tell all.

The Tesla Fiscal Road Less Taken May Be, Ultimately, Brighter

Several factors in 2020 could push Tesla into financial stability.

The stock has gone through a sizable 55% correction and has the potential to rise incrementally but consistently over the next 18 months.

Promising patterns of Model 3 sales are evident. Demand for the Model 3 vehicle appears only to be increasing, with accompanying production escalation in this segment. Just recently, the Tesla Model 3 won the 2019 “Car of the Year” award from the UK’s Auto Express. They called the Tesla Model 3’s performance and range “brilliant.” The UK media seem to imbue the Model 3 with more accolades than does the US media. The disparity begs the question: who is paying the bills at US media entities?

Continual improvements in production and supply chain efficiency mark the Tesla evolution. As each year ends, Tesla becomes more savvy as a manufacturing company. It’s not too much to expect to see Tesla’s deepening manufacturing experience translate into increased production execution. The launch of the Model Y could reflect just such an increase.

Tesla’s Shanghai Gigafactory opening should spur sales growth. Tesla’s Gigafactory 3 in Shanghai should boost sales substantially next year. The idea is to increase production to 1,000-2,000 units per week by 2020. Doing this should contribute to 2020 sales, which would further improve Tesla’s revenue growth trajectory and future earnings potential. Tesla already has a sizable footprint in China, as about 8% of its $22.6 billion in revenues last year came from China.

New models should lead to global expansion. If the first Tesla Semis emerge from the assembly line as anticipated for 2020, it could change the way the trucking industry thinks about short- and moderate-range shipping. Tesla Semi prototypes are already cruising the streets. Additionally, the Tesla Model Y, which is expected to go into production next year, is generating lots of excitement, which should translate into sales. Many of the components required for Model Y assembly are essentially identical to Model 3 parts (roughly 75%).

If auto trends are any indicator, the resignation of BMW CEO Harald Krüger should be prescient about the future of the automotive industry. Krüger named the reason for his departure as “enormous changes, which have brought about more transformation than in the previous 30 years.” To what degree are these “enormous changes” a reflection of Tesla’s impact on transportation? Thomas Wolfe said, “You can never go home.” BMW and other automakers are starting to realize that the way-it-was-done can’t be the way-of-tomorrow.

With Tesla now threatening to disrupt legacy car sales in key Europe and Chinese markets, the Tesla fiscal future is returning to a state of promise and power.

  
 





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About the Author

Carolyn Fortuna, Ph.D. is a writer, researcher, and educator with a lifelong dedication to ecojustice. She's won awards from the Anti-Defamation League, The International Literacy Association, and The Leavy Foundation. As part of her portfolio divestment, she purchased 5 shares of Tesla stock. Please follow her on Twitter and Facebook.



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