Back to top

Zacks Investment Ideas feature highlights: Tesla

Read MoreHide Full Article

For Immediate Release

Chicago, IL – October 2, 2018 – Today, Zacks Investment Ideas feature highlights Features: Tesla (TSLA - Free Report) .

Musk Settles, Tesla (TSLA - Free Report) Rallies: What’s Next?

Last Thursday, the SEC announced that I was charging Tesla CEO Elon Musk with fraud in connection with his August tweet about taking the company private and having “funding secured.” The SEC suit called that communication “false and misleading.”

Subsequently it was reported that Musk and the SEC had been close to a deal that would have allowed him to pay a fine, neither admit nor deny guilt and be barred from acting as chairman of the board at Tesla for a period of two years. Musk apparently decided against taking the deal at the 11th hour, prompting the SEC’s filing of the lawsuit.

The shares plunged 13% in overnight trading Thursday and throughout the day on Friday, closing at $264.77.

Though the specific nature of the negotiations has not been made public, over the weekend Musk reached a deal with the SEC in which he will personally pay a fine of $20 million, resign his role as chairman of the board within 45 days and not seek reelection for 3 years. The company will also pay a $20M fine – for failing to control Musk’s communications with the investing public – and Musk will remain CEO.

On Monday the shares rallied 16%, basically wiping out the Thursday/Friday selloff. Tesla bonds also rallied on Monday, reducing the yield on the company’s convertible notes due in 2025 by more than 50 basis points.

Despite the temporary distraction of the suit and settlement, the result leaves investors more confident about the future direction of the company. With Musk leaving the board but remaining CEO, Tesla will still benefit from his creative vision, but he will also be somewhat constrained by having to answer to a board that will require accountability.

Production and Deliveries

With the SEC suit apparently behind Tesla, all eyes are again focused on the company’s ability to produce and deliver the mass-market Model 3 vehicles in the third quarter of 2018 and beyond. Tesla has set a goal of producing 50,000 – 55,000 Model 3s in the third quarter which would be an important step on the way to sustained profitability.

Tesla does not report production numbers monthly and Q3 financial results are still more than a month away, but the company has lately been reporting quarterly production figures during the first couple of days into a new quarter, so hopefully we can expect a look into how many cars they have been able to produce and deliver Monday or Tuesday.

The electric auto blog Electrek, citing unnamed sources now predicts that Tesla will have produced approximately 53,000 Model 3s in Q3 and 80,000 vehicles overall. Deliveries may actually exceed those numbers as Tesla had thousands of finished autos in inventory at the end of Q2.

Though it would be unwise for the company to official announce that it had “gamed” federal regulations, it is speculated that Tesla avoided delivering it’s 200,000th vehicle until after June 30th, a move which would have the effect of preserving the full federal tax credit of $7,500/vehicle through the remainder of 2018 and saving its customers somewhere in the area of $300 million - assuming 80,000 cars per month. (The credit is reduced to $3,750 two quarters after 200,000 cars have been delivered.)

Musk told employees in an internal communication over the weekend that the company was close to achieving profitability and imploring them to “execute really well” in production and deliveries in the final days of the quarter. “If we go all out tomorrow (Sunday),” Musk wrote, “we will achieve an epic victory beyond all expectations.”

Though investors will still have to wait until early November for audited financials that breakdown the all-important gross margin and net profit figures, the production numbers early this week will offer important insight into Tesla’s ability to finally deliver on its audacious goals.

Stay tuned…

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%. And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Follow us on Twitter:

Join us on Facebook:

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Tesla, Inc. (TSLA) - free report >>

More from Zacks Press Releases

You May Like