Tesla (TSLA) has long been a company whose shares are gaining points for bears, both in good news, which raises hopes for Bull with the groundbreaking products, and bad news, which is a topic of conversation insist that the company is nothing more than an over-burdened, debt-based, credit-financed house of cards.
Ever since Tesla officially launched its relatively cheap Model 3 sedan last summer, this momentum has given it a boost. War between bulls and bears. Stocks often rallied in response to good news from the Model 3, such as positive valuations or signs of improved availability, and sold as often in response to bad news related to the Model 3 production ramp, such as production target push-outs and reports Running
bears have clearly gained the upper hand since mid-March, with Tesla plunging into new 52-week lows amidst a tech sell-off and a barrage of negative headlines relating to the Model 3 production ramp and other issues. They dropped 2.5 percent to $ 269.60 in Thursday after-hours trading after Tesla announced that 1
News of the recall arrived a few days after the NHTSA revealed it probed a California fatal accident with a Tesla Model X SUV. In a statement made on Friday evening, Tesla confirmed that the Model X autopilot system was activated at the time of the accident, adding that the driver of the vehicle had received "several visual and one audible hands-on [warnings] earlier in the ride The driver's hands were not detected on the steering wheel for six seconds prior to the collision. "A local media report indicated that the driver had previously complained that the autopilot was not functioning properly on the section of road where the crash occurred.
Elon Musk's business is now at a level reached in late 2014. Year rally. And while it would not be shocking for Tesla to sneak back over $ 300 in the face of the stock's history, it feels like markets are less willing to quickly forgive and forget the company's recent challenges and return to their good side I urge Tesla to strongly punish the execution and financial concerns.
One reason for this is that – as Facebook (FB), Micron (MU) and others can confirm – markets today are more forgiving about the bad news from technology companies in general. For Tesla, a company whose valuation and money-burning had caused a lot of catching up even when the Nasdaq entered the races, the guaranteed shares would be hit hard in the second half of March in response to negative news flows.
Another reason: After broadly casting doubt on Model 3's long-term production problems and targeted push-outs, Tesla's confidence in the EV manufacturer's ability to produce at the easiest production ramp ever was more seriously shaken , An internal email message recently collected by Bloomberg indicated that the production of Model 3 was only over 200 units per day (1,400 per week) and that technical director Doug Field would consider it an "incredible win" if production would increase to over 300 units per day (2100 per week)
It is questioned whether Tesla will release the forecast published in early January and repeated a month later that the production of Model 3 will be completed by the end of the first quarter will reach a level of 2,500 units per week, and 5,000 units per week by the end of Q2. Based on VIN data, Bloomberg's Model 3 production tracker estimates production as of March 30 at 1,076 units a week and only 11,673 cars – a tiny fraction of the more than 455,000-fold model of Tesla (19659002) Tesla predicted a "Model 3" production rate of 5000 units per week until "late Q1" by January. And by November, it wanted to reach that target by the end of 2017. Many investors are clearly no longer willing to trust Tesla, which has blamed its manufacturing problems in assembling battery modules on much of its production problems in the Model 3 questions to rest.
Of course, the recall of Model S does not help much to improve the perception of Tesla's manufacturing capabilities. A harsh amber report released Wednesday also argued that Musk had "fallen in love with robots and automation," affecting Tesla's quality control and manufacturing efficiency.
Musk has left the door open once before Day resigned as Tesla CEO to focus on product development. The company's recent manufacturing problems could only compound Musk's demands and hand over the CEO's duties to an operations-oriented leader. Remarkably, Musk's potentially huge salary package, which Tesla shareholders have just approved, remains in effect when Musk resigns as CEO but remains Tesla's chairman and chief product officer.
In addition to fears that many Model 3 reservations will be canceled, Tesla's manufacturing problems have the liquidity and liquidity concerns for a company that raised $ 3.5 billion last year and $ 6.9 billion in 2017 net debt ended, aggravated. On Tuesday, Moody's (relying on Model 3 production issues) downgraded his corporate family rating on Tesla's debt from B2 to B3 (the low end of his "highly speculative" rating range) and said the company would be in the near future Need to raise new funds
The CFRA believes that Tesla, which analysts expect to spend $ 2.6 billion this year on average, will need to raise $ 2 billion to $ 3 billion to avoid a 2019 liquidity crisis. While the odds are still good that Tesla will be able to raise additional cash – the company's market capitalization, which is still over $ 40 billion, continues to give it a big cushion of stock – signals investors that conditions are not so friendly will be for the recent capital increases. On Wednesday, the Tesla bonds fell to a value of 86 cents per dollar.
After all this, Tesla can not expect that a positive press release or earnings coverage will be enough to get his stock off its recent funk. Significant progress will be required, both in increasing the production of Model 3 and maintaining a still massive reservation backlog and in improving Tesla's cash flow account.
Similar to Amazon.com (AMZN) and Netflix (NFLX) a lack of meaningful short-term profits (in the case of Tesla, a lack of any profits) could actually benefit Tesla during a raging bull market Stocks made it easier for bulls, with far-flung predictions about what the company might one day earn than it would be for companies reporting big profits. But Amazon and Netflix earned this belief in the stock markets partly through a nearly flawless execution that made it easy for investors to believe the best of their long-term prospects.
Tesla's execution has created more room for doubt, and that has served to quickly take the blooms from his rose because the Nasdaq has gone south. It's certainly possible that the company will return to Wall Street later this year, but it's unlikely to happen overnight.
Jim Cramer and the AAP team hold positions in Facebook and Amazon for their Action Alerts PLUS Charitable Trust Portfolio . Would you like to be warned before Cramer buys or sells AAPL or GOOGL? Learn more now .