(04 JULY 2018)DAILY MARKET BRIEF 2:Tesla shines

(04 JULY 2018)DAILY MARKET BRIEF 2:Tesla shines

4 July 2018, 13:53
Jiming Huang

After years of hype, Tesla finally did it. CEO Elon Musk reached his goal of making 5,000 Model 3s in a week: signalling that Tesla has become a “real car company.” It now expects to increase to 6,000 per week by late August, using among other things a production line inside a tent next to its Fremont factory. Efficiency has jumped: Tesla’s engineers unexpectedly determined that cars built now need 300 less welds than cars built a short time ago. While traditional automakers ridicule the relatively small numbers, Tesla is regaining it mythic reputation. Given this position in the market, forecasts of electric-vehicle growth and lack of real competition, Tesla’s outlook remains bright.

Its shares jumped as much as 6.4% to $364.78 on the news. Still, markets questioned the sustainability of production and the extra costs of additional effort. Cash burn for the Model 3 production has been frightening. Problems with batteries, over-reliance on automation and bottlenecks threaten Tesla’s dominant position in electric cars. Financials remain weak. Tesla has no earnings, so no P/E, but book value is a negative 11.68. Long term debt equals more then 2x shareholder equity.

At last Friday’s close, 34.83 million Tesla shares or 27.5% of those accessible for trading were sold short. Prices of its three convertible bonds were unmoved by the production n

By Peter Rosenstreich

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