A few thoughts on TSLA post conference call:
I never banked on Elon being a Dante aficionado, and clearly he's not.
For a few weeks now, it seemed likely that there were significant manufacturing issues with Model 3. I held out a small hope that things might be mostly turned around by the third quarter call, but I'm not really surprised at a full quarter delay in the production ramp for Model 3. For me, the most crucial piece of information delivered in the call was that the demand for S and X stayed strong across all geographies. Consistent demand for these products in a decent range around 100k is a huge asset for the company. During the summer, I had some concern that the strong interest in the Model 3 might lead to a significant air pocket in S/X demand, but that has not been the case. Interest in the model 3 has continued to stoke interest in S and X -- and that's great news. The fact that the energy storage business is not being hampered by the Model 3 production problems was good news too. I've long regarded energy storage as a sleeper category for Tesla. Within the utility industry, people seem to be getting
increasingly bullish about grid scale storage.
In response to today's call, we can expect Mr. Market to act like it normally does -- as a manic depressive. As well, the "tail" of Mr. Market is likely to wag people's perceptions of the fundamentals. Of course, the quarter delay on model 3 production is bad news that will cost the company dollars. I don't mean to minimize that. As well, I doubt Elon will be where he thought he was going to be with a coast to coast automated drive by year end. But there is no existential threat and nothing fundamentally different about the company's situation in my mind. Could things get worse? Of course. I would be more worried if several problems occurred at once such as a continued delay in model 3 production along with a significant decline in S/X demand and/or an earthquake that hit the fremont facility. *sugar* happens and sometimes in waves. Even in those situations, I think there is enough long term upside and broad interest in the cash rich tech sector that they could raise a ton of cash if they were really in a pinch.
A year from now Tesla will probably be running at a $20 billion run rate in sales, possibly much better. With a still extraordinary growth profile, I would expect the company to trade at 4-5 times sales and the stock be up appreciably from where it is now. How about between now and then? The best time to add to a stock in terms of risk/reward is often the moment when there is a really sound case for operating margin expansion. Doesn't the market, the sell-side, and the buy-side anticipate that? Often no. Even with a very tight case that operating margins should expand, the market often does a poor job of anticipating that change. Something to watch in the coming months/quarters.
Just my $0.02 here.