Wall Street is worried that Tesla’s going broke yet again (TSLA)


Elon Musk

After two profitable quarters in a row, Tesla is once again in financial trouble.
The company has guided down expectations for Q1, and analysts are worried about margins on the new Model 3.
Plus, the company has taken on more debt and has a $566 million bill to pay in November.

Just over a month after Tesla CEO Elon Musk told investors that the company would be profitable going forward, its finances are once again the subject of Wall Street’s most intense scrutiny. Tesla skeptics see blood in the water, while the company’s supporters (still optimistic for the long term) have resigned themselves to yet another nail biter of a year.

Of course, Wall Street being what it is, all of this inevitably meant there would be a Gentlemen’s wager (for charity, of course). And so there was.

“If Tesla reports even one profitable quarter in 2019 (defined as “Net income (loss) attributable to common stockholders” from the 10Q/10K above zero), I will make a donation in the amount of your wager to a charity of your choice,” wrote investor Whitney Tilson in an email to clients and friends. (If you took this bet, feel free to reach out to this correspondent at llopez@businessinsider.com.)

Tesla’s 2019 was not supposed to look like this.

In 2018 it achieved a somewhat steady (though below promised) production of the Model 3, its lower-priced sedan that was supposed to bring electric vehicles to the everyman. The company had two consecutive quarters of profitability for the first time in its history (Q3 and Q4). And in March it defied its critics and payed off a $920 million loan.

The good times did not last.

At the end of February, CEO Elon Musk shocked the Street when he announced that, to sell the standard Model 3 at around $35,000+, it would have to close many of its stores and sell cars mainly online. To analysts all over Wall Street that was a distress signal.

And looking forward through 2019, it’s unclear who or what could come to Tesla’s rescue.

Questionable margins, questionable demand

“International deliveries have begun and are not progressing without some delays; when combined with our expectation that Model S/Model X deliveries disappoint (we lower our 1Q19 delivery forecast), we now expect a meaningful working capital headwind in 1Q19 — and for quarter-ending cash to come closer to the $2bn mark,” Goldman Sachs analyst David Tamberrino wrote in a note to clients on Wednesday.

It sounds like a lot, but Tesla has some hefty bills to pay and plans to execute. The company needs about $1 billion to $1.5 billion to just run itself, according to analysts. That means having cash come in as soon as possible is paramount.

The companies recent moves have some worried. For even the most optimistic analysts, Tesla’s rush to the standard Model 3 and move to online sales was a sign that demand for higher priced, higher margin versions of the car, was all but spent. Over at investment bank Cowen, analyst …read more

Source:: Business Insider

      

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