Tesla Reports The Usual Losses

Tesla reported a relatively normal quarter for the company. It’s used to reporting major losses as it ramps up its production of the Model 3. The goal is to get to 5,000 cars produced per week. The firm lost $3.35 in EPS which actually beat estimates by 6.5 cents. The beat came because of the $50 million gain from zero emission vehicle credit sales. The scary part of the results is that the firm burned $1.05 billion in cash. There was a $702 million decline in the firm’s cash balance to $2.67 billion. There was a $1.05 billion increase in net debt; net working capital was negative $3.05 billion. My big disconnect with the company has always been trying to understand how the firm will be more profitable by selling a lower priced car. That would be like if Apple lost money selling the iPhone X and tried to make money selling the iPhone SE.

Tesla Needs Elon Musk

The investment thesis has always revolved around Elon Musk who is the best as selling ‘cool.’ It’s extremely valuable to be able to sell cool products. He’s the best marketer of our time. Some investors believe Steve Jobs’ primary differentiating point as CEO of Apple was marketing. However, Steve actually delivered on the products he promised. Elon Musk repeatedly has missed estimates and forecasts. He is running Tesla like an expansive Kickstarter campaign. Eventually people putting money into a Kickstarter campaign will want the product promised. It would be great if Elon could only be in charge of marketing, but unfortunately the marketing would ring hollow without him running the company.

Elon Blows Up On Conference Call

Despite Elon Musk not executing on his vision in a timely fashion or in a close to profitable one, he is the only asset the company has to keep it afloat. This is where the problem lies because his eccentric actions are growing problematic. His joke on Twitter that Tesla was going bankrupt on April fools was nothing compared to how he performed on this quarter’s conference call. He was challenged by an analyst because the company pushed back its goal of achieving 25% gross margins by about 6-9 months to the middle of 2019. Elon scoffed at this difference saying 3-6 months wasn’t a big deal. That started his erratic behavior.