With the advent of the internet came a new type of information gathering we’ll call the click-reporter. This new breed lives by provocative headlines that bring in clicks from the mouse or touchpad of internet viewers, and it’s those clicks that bring in the ad revenue. Get the scoop, create the enticing headline and some text to support it, and you’re golden. Elon Musk’s reaction to such reporting has really stirred this month.
Maarten, Zach, and I spent some time creating a model to look at how Tesla could become profitable in Q3 and beyond. It was based in part on taking Elon and Deepak telling the truth. I just wanted to see what Tesla would need to accomplish to become profitable.
On Tesla’s last quarterly earnings conference call, CEO Elon Musk largely avoided questions from Wall Street analysts in favor of retail investor (and YouTube personality) Galileo Russell. In turn, analysts largely dismissed Tesla’s rosy outlook for the road ahead. However, one Wall Street analyst is gaining a newfound appreciation for Tesla’s inherent advantages over legacy carmakers.
A couple of weeks ago, I made an EPS prediction for Tesla’s second quarter. At the time, I said, “the key disclosure this quarter will be the number of cars produced. I am expecting almost twice as many cars produced in the 2nd quarter compared to the first quarter. My EPS prediction relies on cars produced.”
Dating back to the early days of Model S production, Elon Musk has been feuding with Tesla short sellers. Back then, Musk cautioned those betting against Tesla stock that a “tsunami of hurt” was coming their way. Sure enough, it did. Tesla’s stock skyrocketed. And last year, when the stock was surging, Musk taunted shorts on Twitter, “Stormy weather in shortville.” According to Zero Hedge, “Elon Musk’s feud with Tesla shorts is not business, it’s just personal.”
Tesla haters are coming out of the woodwork everywhere. That said, there could be some underlying urgency for this sudden, sweeping attack. According to Giles Parkinson (via RenewEconomy), “It seems that Elon Musk’s detractors – and they are legion – have decided that it may be now or never if they have a chance of stopping the founder and CEO of Tesla in his tracks.”
I am making an earnings per share (EPS) prediction only for the Tesla automotive segment, excluding leasing, since I think Wall Street is way too negative on Tesla.
During Tesla’s last conference call, concerning the first quarter of 2018, Mr. Deepak Ahuja, Tesla’s Chief Financial Officer (CFO), while answering a question from Rod Lache, an analyst at Deutsche Bank Securities, Inc., said: “Rod, we are very CapEx-efficient, overall. Let me just start from that point. And if we look at our depreciation costs on a per unit basis at steady run rate of 5,000 or so cars per week, we are in my mind well below most of our competitors – well below $2,000 per unit depreciation cost.”
Discussions about a possible new epic “short squeeze” on Tesla stock are trending these days. The company is going through the most important transition in its young history, as the electric car and energy company strives to achieve mass market production of its more affordable Model 3 and finally reach profitability after years of massive R&D and infrastructure expenditure. As such, Tesla shares have always caught the attention of investors and speculators alike, including record levels of “short selling”. What could the next short squeeze look like?
“Tesla bankwuptcy” would perhaps be better termed “shorts losing their shirts”
