tsla stock

Tesla’s Stock About To Turn Up

Here’s the famous vegetable turn up.
Whoops Turnip, never mind.

We’ve been patient for Tesla’s stock to start turning up. It may be happening. We called out a 280 support. It appears to have held.

Today was also nice. You had “bad news.” Oh no Lucid and oh no they have to deliver way too many cars and Musk is whining about it. It’s such a terrible calamity of course to have to deliver so many cars, right? Not really.

Ford and GM wish they could be crying on Twitter that they have to deliver way too many cars. Oh no, right?

And in the face of all that “bad news” the stock opened down and managed to crawl its way back to up all day. That’s also in the face of a market that got nailed into the close.

So you had bad news today and the stock worked its way up all day to flat in a down tape. That’s great action.

Tesla gets our official Turnip award for starting to turn up. Production, delivery and earnings reports around the corner with no-go-private news apparently behind us. Turn-up.

Quick quiz:
Having way too many cars to deliver is:
A) Terrible because as a reporter you have to put a negative spin on everything.
B) A big problem because you’ll probably make too much money which will cause pay-down debt hell.
C) A sign of lack of demand for Tesla which means they must be going bankrupt very soon.
D) Really a very nice thing that most car companies could only dream of.
Answer in comments.

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We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tesla: Production Even Close To Estimates, Huge For Earnings

It was reported by Electrek that Tesla is apparently on track with their Model 3 quarterly ramp but below their 6,000 / week target.

The ramp is just so big that small misses don’t really matter. Worrying about such precise measurements misses the big picture.

Tesla even coming close to their targets means that Q3 deliveries would jump about 90% from Q2. If they continue this pace deliveries will be up 3X by Q2 next year from this year’s Q2.

Being high or low from those weekly, monthly, or quarterly targets misses the point.

…And Really Misses The Point For Earnings

What’s most exciting about the story is of course earnings. Earnings are what drives stock prices.

Any data that expects Tesla comes anywhere close to their production or delivery targets means huge things for earnings.

Analysts were in shock on Q2 as S&X gross margins jumped from Q1. They were up anywhere from 500-1000 basis points from Q1 to Q2.

Why?

CEO Elon Musk said, “as we improve efficiency, then gross margin and so the profitability per car just improves dramatically.”

Well you saw that in Q2.

What happens to gross margins if deliveries even come close to being up 90% in Q3 from Q2?

What’s going to happen to gross margins when deliveries are up 3-fold by Q2 next year?

We think gross margins are going to jump.

Shorts Missing The Forest For The Trees

Even with all the communication blunders or smart short stories out there, they all get erased as production ramps 90% sequentially and 3-fold year-over-year.

Remember, “as we improve efficiency, then gross margin and so the profitability per car just improves dramatically.”

That’s now.

Q2 deliveries were up 36% sequentially and gross margins jumped. So for Q3 if deliveries are up 90% sequentially what’s going to happen to gross margins? Look out.

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Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Correction: added the word “sequentially” Sept 3, 2018, 9:57 AM EDT

Tesla Stock Had A Great Day Today

For any other day you wouldn’t think the stock being down 1% was such an accomplishment. But following Tesla’s (NASDAQ:TSLA) announcement that they were canceling their go-private plans, down 1% was a very strong performance.

What Are Shorts Expecting?

Shorts were licking their chops pre-market but again came up empty.

One thing I’m personally excited about is one simple thought process. The shorts and bears have been licking their chops for a long time now thinking this is a zero because of all the losses. But the stock has only gone up.

But what’s next? Think for a second. Profits.

After all those losses-stock-up-anyway, we’re going to get profits. What’s going to happen to the stock then? We think the simple logic-math says it’s going to go higher still.

Here’s the complex proprietary formula we came up with.

IF LOSSES = UP THEN PROFITS = AT LEAST UP

Not so hard, right?

And Musk’s Friday night blog comments said,

“…and we now need to show that we can be sustainably profitable. With all the progress we’ve made on Model 3, we’re positioned to do this, and that’s what the team and I are going to be putting all of our efforts toward.”

Nobody read that? Shorts? Bears? Anybody?

They are “positioned to do this.” What’s this? To be “sustainably profitable” based on the “progress we’ve made.” They are not one-quarter profitable. They are positioned to be sustainably profitable based on where they are right now.

So remember; losses = up stock then profits = at least up stock = rocket ship?

The stock’s action today being down only 1% on confirmation of no transaction was great action. Action, watching what the stock does versus what you would have expected, was amazing today.

The stock action today was saying many many investors are relieved that they get to share in the upside. We had said Musk wanted to keep that upside for himself by going private. In the end he felt bad but also didn’t understand the complicated web of taking a stock back from the public.

Conclusion

The simple fact that Musk wanted to go private meant that he saw incredible value in his company and wanted to lever that for himself. Investors smell that. Bears are too bearish and emotional and can’t see that going profitable is something huge. How long can they hold on as this earnings rocket ship takes off.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tesla’s Potential Outcomes

Tesla's potential outcomes

Unfortunately Elon Musk’s “funding secured” comment last week was not as secure as previously hoped.

Clean Up

Now the board has selected a special committee which, for one protects Tesla (NASDAQ:TSLA) from any more Musk tweets about going private. The Tesla press release today said, “no Going Private Transaction will be consummated without the approval of the special committee.” That protects the company from future tweets.

It looks like today’s company release poses as clean up to avoid this situation getting any worse as a legal liability.

$420 Too Cheap

Our hope is that there is no deal. $420 is peanuts compared to our price target of nicely over $1000.  The Street’s at $2.89 for 2019 earnings per share. We’re now at over $20.00 per share after going form GAAP to non-GAAP to align with the Street estimates who are all at non-GAAP.

Not As Secured

After seeing Elon Musk’s blog post yesterday it appeared his funding was not as secured as he originally stated. We wrote in chat yesterday morning there was risk to the shares.

Will Other Investors Allow $420

There are now many potential buyers named; a new one each day. But this only springing last week on Board members, a decision process could take time. $420 seems incredibly low especially if it forces out non-accredited investors. We’d guess the board is looking into that so to avoid any further legal risks.

If there are final bidders agreed by Musk and the special committee then you have to wonder if other investors or private equity people looked through the Tesla numbers. Did they notice the jump in gross margins in Q2? Did they run the math what that means for Q3. If they did we’d think they can get EPS numbers closer to our $20.00+ than the Street’s $2.00+ for next year.

Did they do the math? We think they did and who isn’t interested in capturing that differential. We’d guess that’s the driving force in Musk’s desire to go private, not the shorts. We’d guess the 10X EPS upside that’s around the corner is why he’s so antsy to take this company back at a 20% premium. Can that happen? Being a public stock, a public market, we’d guess others come in.

But Can Activists Do Anything?

But can activists really do anything?

$420 is way too cheap but could get done anyway. Musk managed to get Solar City approved that time without a special committee of the board. This time Tesla was more careful to elect such a committee to show more objectivity in this important going private decision.

Musk has proven to be able to sway his board and we’d guess he can sway this special committee.

If funds are finally secured and the board agrees then it comes down to a shareholders vote.

Tesla has a super-majority rule needing 66% of the shareholders approval to pass major changes. Between Musk and those close to him he may hold 25-26%. To pass a vote he’d need another 41%. He can probably do it seeing that he had 85% of outside shareholders approve Solar City.

Those invested with Musk believe in him. Those on his board also believe in him. He can probably manage to pull this off.

There is still room to say that the price is too cheap and other profit minded activist investors can try to come in and swing the vote.  If that were to happy you could get a bidding up of shares as activist investors would need to buy up shares to enhance their voting position.

Takes Time?

As this go private decision process likely can take time we’d guess the stock can be weak. The longer it takes the more investors can lose patience. Expect more short stories about issues with the “Funding secured” comment which can drag the stock.

Conclusion

We hope in the end this earnings story plays out.

I would guess $420 is too low. Hopefully any snap back from a drop would mean some investors see a way to achieve more than that $420.

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We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Updated August 19, 2018, 4:46 PM EDT, spelling

Tesla: Largest Earnings Inflection Story I Remember

Tesla reported earnings. That’s just it. They will actually start to report positive earnings in Q3 and Q4. But they told us they would already. I guess investors finally get it that it’s approaching reality.

In June we said,

“If you’re short, how in your right mind do you say ‘la di da, no biggie'” that they are going to turn a profit.

Not only that, our earnings numbers go up huge.

Backing into this reported quarter S&X are deep into the 30s% gross margins. So if Model 3 hits their 15% gross margins in Q3 and 20% in Q4 the auto gross margins are going to start being huge. (I have no problem using the same word, huge, in an article countless times. Hope that’s ok.)

Also in Q1’s call CEO Elon Musk said 25% Model 3 gross margins was a possibility by Q4, so there could be upside.

The Street’s at like $2.00+ for 2019. Give me a break. Our EPS for 2019 go to $18 GAAP and $20-21 non-GAAP*. What PE would you like to use. You decide. Whatever it is you’re going to get a big price target on our numbers.

Shorts need to get out and institutions need to get in.

This is going to be the biggest earnings inflection story I think I can remember. Going from uh-oh losses and media-concerned bankruptcy, to see-ya later no monkey-business GAAP profit.

Stock’s going higher.

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Looking For Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.