Tesla (NASDAQ:TSLA) Will Not Survive it $10.6-B ‘Cash Burn’
A well-respected Wall Street analyst predicts that Tesla Inc. (NASDAQ:TSLA) shares will dive deep as it nears an unprecedented $10.6-B cash burn.
In a note Wednesday, he told investors to avoid buying the stock due to Model 3 production risk, something both Shayne and I have been saying for months.
“Tesla’s persistent cash burn has been a major investor controversy … In fact, Tesla may be the largest public company in history to have never generated either positive annual cash flow or positive annual profit,” said Toni Sacconaghi, a senior sell-side equity research analyst at Sanford C. Bernstein.
Many on Wall Street betting that Tesla will establish itself as a major electric car seller before General Motors Co. and other rivals can catch up, its stock has surged 62 percent in 2017.
The analyst estimates Tesla will burn through $4.7-B of cash this year reaching a total $10.6-B of cash burn as a public company by the end of Y 2017, which is unprecedented for a nearly $60-B market cap company.
“We believe the essential issue with Tesla’s stock is not how much cash the company burns right now, but rather how well the company can execute upon its Model 3 launch – specifically around gross margins – and demonstrate that it has a clear path to long-term profitability,” he wrote.
“We are fairly Bullish on the evolution of the EV (electric vehicle) market, but we worry about several near-term issues for Tesla, and would not be chasing the stock at current levels,” the firm’s analyst writes.
Meanwhile, shares of Tesla remained in a correction Wednesday after a billionaire British inventor announced plans for his own electric vehicles, taking the shine off an analyst prediction that Tesla’s cars would be commonplace within 2 years.
After losses in recent days, it remained down 10% from a record high on 18 September. Many investors define a correction as a 10 – 12% decliner.
In July, Tesla lost 18% over 9 sessions before recovering and advancing to new highs.
Underscoring growing competition James Dyson, inventor of the bag-less vacuum cleaner, said at a London event Tuesday that his company was building an electric car that will launch by Y 2020.
Mr. Dyson said his company would spend $2.7-B on solid-state battery technology and vehicle design and that a 400-member team of engineers had already spent 2.5 years working on the secret project.
Tesla’s CEO Elon Musk has promised to boost car production to 500,000 vehicles next year, close to 6X its Y 2016 output, a target experts believe is not realistic.
|NASDAQ:TSLA||340.97||27 September 2017||-4.28||349.9||351.49||340.5||6,024,300|
|HeffX-LTN Analysis for TSLA:||Overall||Short||Intermediate||Long|
|Neutral (-0.11)||Neutral (-0.22)||Neutral (-0.10)||Neutral (-0.01)|