Tesla stock is utterly indifferent to whether the company’s losses are bigger or smaller than analysts predict. Wednesday’s miss, at 77 percent, was the biggest ever, according to figures compiled by Bloomberg -- and the stock initially traded up after hours. I looked back at the prior 24 quarters and compared the amount by which Tesla beat or missed the consensus forecast with the next day’s share price move, using data compiled by Bloomberg. The correlation coefficient was all of 0.0374 -- or, among friends, “zero”.Liam Denning
A peculiar situation to say the least. Tesla is burning cash like a tech startup (effectively borrowing money even from future customers through deposits for the Model 3), but they manufacture physical products (cars and batteries) with a slow cycle from innovation to market and high fixed costs. At some point they are going to have to deliver on profits – or at least achieve positive cash-flow like Amazon.
I recommend to follow-up with an excellent analysis of Tesla’s situation, complete with numbers and valuation estimates, and the oversized role its CEO plays in the public image of the company:
Your views on what you think Tesla is worth will be a function of what you think about Elon Musk. If you believe, as some of his most fervent defenders do, that he is that rarest of combinations, a visionary genius who will deliver on this vision, you will find Tesla to be a good buy. At the other extreme, you consider him a modern version of P.T. Barnum, a showman who promises more than he can deliver, you will view Tesla as over valued. Wherever you fall in the Musk continuum, Tesla is approaching a key transition point in its life, a bar mitzvah moment so to speak, where the focus will shift from the story to execution, from master plans to supply chains, and we will find out whether Musk is as good at the latter as he is in the former.
Can Musk the visionary become Musk the builder? He certainly has the capacity. After all, if you can get spaceships into outer space and back to earth safely, you should be able to build and deliver a few hundred thousand cars, right? Given Tesla’s missteps on delivery and execution, though, Musk may not have the interest in the nitty gritty of operations, and if he does not, he may need someone who can take care of those details, replicating the role that Tim Cook played at Apple during Steve Job’s last few years at the company.Aswath Damodaran