I'm bullish on Tesla
TSLA
for 3 reasons:
1. I believe in the company long term. Eventually, 100% of vehicles on the road will be electric, including semi and pickup trucks. This is due to both economic and environmental reasons, in addition to a superior driving experience. And Tesla, as the most prestigious EV brand with an iconic CEO, will have significant market share. I'm also convinced that Tesla's rival autonomous driving technology (LIDAR) is doomed to fail, as it's too expensive, too ugly, and will never be able to perform in inclement weather due to scientific limitations. When you consider all of the various industries Tesla can disrupt (automotive, energy, rideshare, freight, and more), it's not impossible to see Tesla becoming one of the 5 or 10 largest companies in the world.
2. I believe in the company heading into Q2 earnings. The market has been pricing in a disastrous second quarter for Tesla largely due to demand and balance sheet concerns, in addition to conflict with China over trade and broader market and economic weakness as of late. However, I believe that demand and cash concerns have both been refuted due to recent developments. Tesla finished last quarter with $2.2 billion in cash and raised another $2.7 billion in a recent capital raise. They also have up to another $2 billion on the way from selling Fiat Chrysler carbon emission credits. This provides Tesla with up to $6.9 billion in cash. I do not believe they have any debt maturing in 2020. And even at a burn rate of $500 million per quarter, this provides Tesla with plenty of time to ramp up. You have to believe that demand for Tesla's product will fall off a cliff to believe that they have solvency concerns, and in an industry growing as fast as the EV industry, this is highly unlikely. Remember, Tesla was actually profitable in Q3-Q4, and they have their Shanghai factory on the way later this year. As far as demand goes, Elon Musk's leaked email stated that they had 50,000 new orders for the quarter as of May 21. This is 980.4 new orders per day or 89,216 for the quarter if that pace continues. Tesla also had 14,119 vehicles they were unable to deliver on time from last quarter that will be counted in this quarter. If the company can improve their delivery operations, these numbers make it clear that they have a great shot of hitting their 90-100K delivery guidance for the second quarter and potential profitability, which would come as a shock to investors who have priced in no more than 80K deliveries and an EPS loss.
3. There's an enormous amount of long term technical support in the $175-$190 range.
As you can see, the 100-month moving average stands around $189. It'll be important to close above this level at the end of the month (later today) if we want a chance to avoid testing the $175-$180 range. Below that at around $177-$182 you have both a long term support line and a long term rising trend line.
It's unusual to have this many factors converging to present an optimal entry point in a stock that could return over 1000% in the next 10 years. I bought stock following Elon Musk's leaked email about new orders and I'll be buying more in the $175-$180 range if we get there before Q2 earnings and no new bad fundamental news comes out.
TSLA
for 3 reasons: 1. I believe in the company long term. Eventually, 100% of vehicles on the road will be electric, including semi and pickup trucks. This is due to both economic and environmental reasons, in addition to a superior driving experience. And Tesla, as the most prestigious EV brand with an iconic CEO, will have significant market share. I'm also convinced that Tesla's rival autonomous driving technology (LIDAR) is doomed to fail, as it's too expensive, too ugly, and will never be able to perform in inclement weather due to scientific limitations. When you consider all of the various industries Tesla can disrupt (automotive, energy, rideshare, freight, and more), it's not impossible to see Tesla becoming one of the 5 or 10 largest companies in the world.
2. I believe in the company heading into Q2 earnings. The market has been pricing in a disastrous second quarter for Tesla largely due to demand and balance sheet concerns, in addition to conflict with China over trade and broader market and economic weakness as of late. However, I believe that demand and cash concerns have both been refuted due to recent developments. Tesla finished last quarter with $2.2 billion in cash and raised another $2.7 billion in a recent capital raise. They also have up to another $2 billion on the way from selling Fiat Chrysler carbon emission credits. This provides Tesla with up to $6.9 billion in cash. I do not believe they have any debt maturing in 2020. And even at a burn rate of $500 million per quarter, this provides Tesla with plenty of time to ramp up. You have to believe that demand for Tesla's product will fall off a cliff to believe that they have solvency concerns, and in an industry growing as fast as the EV industry, this is highly unlikely. Remember, Tesla was actually profitable in Q3-Q4, and they have their Shanghai factory on the way later this year. As far as demand goes, Elon Musk's leaked email stated that they had 50,000 new orders for the quarter as of May 21. This is 980.4 new orders per day or 89,216 for the quarter if that pace continues. Tesla also had 14,119 vehicles they were unable to deliver on time from last quarter that will be counted in this quarter. If the company can improve their delivery operations, these numbers make it clear that they have a great shot of hitting their 90-100K delivery guidance for the second quarter and potential profitability, which would come as a shock to investors who have priced in no more than 80K deliveries and an EPS loss.
3. There's an enormous amount of long term technical support in the $175-$190 range.
As you can see, the 100-month moving average stands around $189. It'll be important to close above this level at the end of the month (later today) if we want a chance to avoid testing the $175-$180 range. Below that at around $177-$182 you have both a long term support line and a long term rising trend line.
It's unusual to have this many factors converging to present an optimal entry point in a stock that could return over 1000% in the next 10 years. I bought stock following Elon Musk's leaked email about new orders and I'll be buying more in the $175-$180 range if we get there before Q2 earnings and no new bad fundamental news comes out.