Tweet
Tesla still kicking… I thought the prediction was q2 2019 all the stuff was gonna hit the fan
It did, and as they should have done earlier they raised capital (nearly 3B), they probably were risking bankruptcy with how last minute it was and their equity/bonds were acting like it as well. As long as they can raise capital the company can go on forever no matter the losses. They are still structurally unprofitable so far from a business standpoint. Stock price down 36% over the past year and down 5% over 5 years, which is been the main crux, they are highly over valued making them vulnerable, and they've lost a little luster, but much more room to go for sure as they are valued at 1.6x revenue whereas ford is 0.2. That would put their actual value around 35-50 if they end up getting revalued (which will happen eventually as they are indeed an auto company).
This qtr should also be somewhat of an important one, its the first full qtr of model 3 comps that will have full scale year over year comps and it wont have the favorable ones it did prior showing massive growth. If they dont show real growth, in actual revenues, etc...its going to put a lot of pressure on their "growth company" narrative. Their multiple is based on it and given how high it is, it essentially becomes an extremely leveraged forecast that is very very sensitive to seemingly small changes in revenue/profits. This seems to be what most people misunderstand about large post earnings moves or revisions by analysts. Sometimes these prices are tied to models of growth with 50-150% growth per year, which justifies a lot. If it comes in 5-20%, well, that really crushes the forward model.
For example, teslas price target and multiple justification from 2013-14 DCF which has been the bedrock price story (original px target 320) for this stock was an EPS of around $20/share in 2020 and 15ish for 2019. It is on track to be high negative this year. So, if their EPS isnt even positive and revenues show little or worse negative growth, its going to be brutal to share price.....eventually. Still have several forward qtrs for comps to hit of course, this is just the first. Superficial observers seem to be impressed when they deliver record numbers of vehicles, while revenue declines and they still cant make money, and we're kinda in a great economy. Big deal if you sell a bunch more because youre giving the product away for far less than they cost. These things eventually matter.
Lawsuits and legal issues continue to mount as well which are negative over time and give management less leeway and take time and resources away.
I think the Wework debacle might bleed over into these types of companies some.
These things dont happen overnight, until they do. And even then companies dont just disappear. I mean a movie and a book had already been published and the case basically closed on Theranos and there were still people working there like a year after. Biz world is strange.
Comment