I'm going to be a contrarian here and posit the short-term bear case.
IMHO, Tesla badly managed the earnings report. The truth is, after the delivery report was released in April, no one was going to be surprised with their quarterly revenue and loss. In fact, they came pretty close to hitting analysts' targets on that. If they had just taken that lump, talked about how Model X production was straightened out now, and say they're still on track for year-end numbers, this would have been a ho-hum report (given that Tesla had already dropped ~30pts in the past few days).
I actually think all this talk about moving forward volume production by 2 years is a *negative*. First, it's wildly unrealistic, and I say this as someone who believed in their gigafactory when they first announced it
. We've seen over the past 3 years that the best they can do with ramping production is ~60%/yr. Even that may be too much given the quality problems seen on the Model X (and even the first year vintage of the Model S). And that is with being FCF negative the whole time, and doing fairly large capital raises every 1-2 years to fund expansion.
Now ~60% is very impressive, but Musk is essentially promising >150% expansion every year for the next few years to hit 500k in 2018. Without details on how he's going to do that, I'm very doubtful Tesla will get even close to that number. Manufacturing capacity isn't *just* about throwing money at the problem. You need to hire people, train them, debug production lines, work with vendors, manage logistics, etc. etc. etc. It's like the classic quip that a manager is someone who thinks 9 women can create 1 baby in a month. While it's amazing that Musk has managed`a 60% growth rate so far, that has been a struggle. Do I think he can essentially double that rate of growth? No. Not without a more concrete plan with details.
So his proclamations of 500k in 2018 don't do anything for me. He can promise the moon but I need to see details. OTOH, I *do* believe the rest of his statements, mainly that he'll be FCF negative the rest of this year, and that he's going to raise capital to increase massively increase capex.
So short-term, this is a net negative, while long-term it is potentially a positive (although really no more positive than before; who didn't think Musk was going to expand production as rapidly as humanly possible and introduce the M3 as early as humanly possible?). And I say potential positive because with all the increased spending, he's *increased* the short- and medium- term risk of insolvency. Remember Keynes's famous quote "the market can remain irrational longer than you can remain solvent". While Tesla's long-term prospects are great, it still has to get there from here. Expanding as rapidly as Musk is talking about (expanding Fremont, opening new plants worldwide, doubling production every year, expanding Powerwall, completing the Gigafactory) makes it much riskier that he runs out of money before all the investments bear fruit.
There have been lots of companies with great long-term potential that spread themselves too thin, and expanded faster than was prudent, and went BK before they could realize their long-term potential. Tesla is already showing strain right now (FCF negative, issues ramping production on MX, quality control, vendor management, even burning out senior executives is not a good thing). Setting a goal of moving twice as fast, and taking on additional debt, etc. to do it is risky.
Don't get me wrong: I'm rooting for him, and if he succeeds, world domination is two years closer
So I remain long-term bullish. But he has significantly increased the downside risks over the short- and medium- term. Maybe it pays out in the end (I hope so), but the stock price today and probably over the next few days, I think is accurately reflecting a re-evaluation of all that Musk has said.
