Tesla Model Y Production

Tesla Stock Soars On News They ‘Only’ Lost $717 Million

Sometimes I feel like I’m living in an alternate universe… it’s like the financial version of the ‘upside down’ from Stranger Things.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

We respect your email privacy

Q2 hedge fund letters, conference, scoops etc

Tesla Model Y Production

Blomst / Pixabay

Case in point: last night the infamously loss-making electric car maker Tesla announced its quarterly earnings.

As usual, the numbers were gruesome. Tesla's net loss was TWICE AS BAD as the previous quarter, a record NEGATIVE $717 million. That’s a LOT WORSE than analysts were expecting.

After adjusting for various capital investments, Tesla’s total cash burn for the quarter was MINUS $740 million… which is a bit better than what analysts were expecting. Congratulations.

Oh yeah, and Tesla CEO Elon Musk mustered an apology to all the analysts he insulted on the previous quarter’s earnings call (where he derided them for asking “boring” and “bonehead” questions).

And now the stock has soared 12%.

Is this really what capitalism has come to?

Companies are richly rewarded for posting record losses that are worse than anyone expected because the grown men who pilot them can refrain from publicly hurling childish insults at financial analysts while managing to ‘only’ burn $740 million of shareholder capital?

Give me a break.

In total, Tesla has burned through $5 billion of its investors’ cash.

And nearly half of the money it has left in the bank is in the form of customer deposits, which are often refundable. So that money’s not even safe.

Most likely Tesla will have to raise billions of dollars over the next few years just to stay afloat.

And yet, despite these losses, and despite the fact that their CEO is sidetracked making flamethrowers, limited-edition Tesla surfboards and promising to solve Flint, Michigan’s water crisis. . .

. . . and despite the fact that he seems more concerned with Twitter spats than running the business (the Wall Street Journal ranked Musk as the second-most active tech CEO on Twitter behind Salesforce.com’s Marc Benioff, with 1,256 tweets this year through mid-July) . . .

. . . shareholders still granted their CEO the largest executive compensation package in the history of the world earlier this year (worth a potential $50 billion). . .

. . . and have now doubled down on their investment, sending the stock price up 12%.

As W.C. Fields once said, “If you can’t dazzle them with brilliance, baffle them with bullshit.”

No doubt Musk is full of both.

(If you want to dispute the latter, please refer to Musk’s tweet in which he called the British cave diver who helped rescue the trapped boys in Thailand a pedophile.)

Now, it may surprise you to hear me say that I appreciate what Musk has done for consumers.

This guy gave a swift kick in the gonads to the entire auto industry, forcing them to reinvent themselves and create more innovative products.

So now all the big manufacturers are getting in on driverless car technology, AI and electric vehicles.

And the cars they produce are more advanced than ever before. This is great for consumers, and most of the credit goes to Elon Musk.

Plus, to be fair, Tesla makes great cars. (Unfortunately they lose money on every single one that they sell…)

I certainly hope the company is able to pull it off. I sincerely do.

I also hope the Dallas Cowboys win the Super Bowl this year. But the odds are slim.

The odds are also stacked heavily against Tesla. They’re rapidly running out of cash at a time when interest rates are rising and competition is stiffening.

They’re no longer the only game in town when it comes to luxury electric vehicles, so they’ll have to contend with Mercedes, BMW, Audi, etc. going forward.

And, let’s be honest, Tesla isn’t exactly the most prudently-managed company in the world.

You can say a lot about Elon Musk’s vision and tenacity. But often the greatest visionaries don’t make the best business executives.

Business is… well, serious business.

Recruiting, training, managing thousands of employees and dealing with intricate details in a complex manufacturing business… these skills don’t always go hand-in-hand with creative genius.

Clearly Elon Musk doesn’t work alone. But there’s been an alarming exodus of top executives who have departed Tesla over the past few years.

(Check out this list compiled by Bloomberg of the dozens of senior execs who have left Tesla since 2016, including Chief Accounting Officer, Chief Financial Officer, President of Global Sales, Director of HR, etc.)

But Musk is undeterred… he’s staying the course.

It reminds me of something Barack Obama once said– “If you’re walking down the right path and you’re willing to keep walking, eventually you’ll make progress.” #DidIjustquoteObama??

Unless, of course, you’re on the wrong path. In which case you’ll eventually lose everything.

Elon seems content to remain on his loss-making, cash-burning path.

Regardless of the consequences, regardless of the feedback that the market is providing.

But we’ll see. Anything’s possible.

In light of such obvious risks, however, it still seems like a sign of pure lunacy.

To wit:

Tesla manufactures electric cars. BMW also manufactures electric cars.

Tesla loses money on every sale and posts record losses. BMW is profitable.

Tesla burns through billions in cash. BMW pays its shareholders a 5% dividend.

Yet with a $50 billion market cap, Tesla is now worth exactly the same as BMW.

Something is wrong with this picture.

But perhaps Elon can convince us otherwise on Twitter.

And to continue learning how to safely grow your wealth, I encourage you to download our free Perfect Plan B Guide.

Because inside you'll learn no-brainer strategies on...

How To Generate Exceptional Investment Returns while Taking Minimal Risk

  • Safely earn up to 12% per year while taking minimal risk through a unique investment that's not available in the conventional financial system.
    You'll never hear about this on CNBC.
  • Which Investment Strategy generates exceptional returns, easily outperforms stock markets AND has a 52-year history of success.
  • How we consistently generate double-digit returns (and sometimes even triple-digit) investing in profitable companies that are selling for peanuts.
  • How champion investors ALWAYS cover their downside risks first and still make fantastic returns… no matter what happens in the market.

You'll learn all of these and many other useful strategies such as how to legally reduce your taxes and how to obtain a valuable second passport (potentially even for free) inside this free guide.

Article by Sovereign Man

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

Are you a smart investor? Join tens of thousands of sophisticated investor reading our authoritative free newsletter

* indicates required


Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Sign up today and get three months free

Use coupon code vip19 or click on the button below

Limited time offer only ENDS 10/31/2019 or after next 25 20 subscribers take advantage whichever comes first – please do not share this discount with others

 

WhatsApp chat
0