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Should Investors Believe Elon Musk's Latest Tesla (TSLA) Promise?

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Shares of Tesla (TSLA - Free Report) popped on Friday after CEO Elon Musk once again took to Twitter (TWTR - Free Report) to boast, this time about the electric car maker’s second half outlook. But at this point, it seems somewhat strange that so many investors still react positively to anything Musk says.

In his latest Twitter proclamation, Musk responded to a recent article that simply noted that Tesla will have to raise more money this year.

Tesla’s CEO pushed back on The Economist’s article saying that his company does not need to raise any money this year. Musk also wrote that Tesla would be profitable in the second half of this year.

With no other major Tesla-related news to speak of, and markets relatively flat, Tesla’s stock price likely climbed over 2% based mostly on this tweet. It is understandable that Musk wants to defend his company, but investors should consider taking a look at some of Tesla’s current fundamentals and projections in favor of giving too much credence to Musk’s tweets—with his track record of overpromising.

Model 3

Tesla’s mass-market Model 3 production setbacks have been well known for some time. And production issues make sense for a company that is trying to revolutionize the automobile industry. But a $50 billion company and its CEO should perhaps be more adept at forecasting these issues, and therefore providing more realistic guidance.

A recent CBS News interview helped illuminate Tesla’s Model 3 production woes and Musk’s inability to provide investors with accurate Model 3 guidance. One exchange with CBS’ Gayle King, while on tour of a Tesla factory, was particularly important.

“You started saying, 'We'll do 5,000 a week.' Then, okay, that didn't work out, 'We'll do 2,500 a week.' And now it's a little over 2,000 a week. Does that trouble you?" King asked. To which Musk replied, “Yeah. No, that's true….I need to figure out how to be better….And then we can be better at meeting goals."

Analysts at Jefferies believe that Tesla most likely fell short of its own first quarter Model 3 production goals. It also seems that investors have become more concerned that Tesla hasn’t lived up to its own expectations, with its stock price down roughly 4% over the last year.

However, none of this means that Musk’s latest tweet is untrue. So let’s take a look to see if our current estimates support the CEO’s claims of second half profitability.

Looking Ahead

Tesla’s first quarter 2018 revenues are projected to climb by 20.5% to hit $3.25 billion, based on our current Zacks Consensus Estimates. Tesla’s full-year 2018 sales are expected to soar nearly 60% to hit $18.77 billion.

Meanwhile, Tesla is projected to post an adjusted loss of $3.15 per share in Q1 and a full-year adjusted loss of $7.05 per share. Clearly, our current 2018 consensus estimates don’t match Musk’s tweet.

With that said, investors should note that Tesla is expected to report adjusted full-year earnings of $1.63 per share in 2019. So maybe Musk is just a year off.

But with more established automakers like Ford (F - Free Report) , General Motors (GM - Free Report) , and Volkswagen (VLKAY - Free Report) ready to begin mass-market electric vehicle production, Musk’s words need to turn into actions sooner than later.

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