$TSLA, $GM, $TM, $VLKAY, $RACE
Tesla (NASDAQ:TSLA) weekly spins the market an amazing string of hyperbole from the smirking mouth and rolled up eyes of CEO Elon Musk, from ankling C-suite executives and disgruntled factory workers.
And that friends is great for Tesla’s legion of scalping day traders in it very overvalued stock, even though the fact is that Tesla, in its core mission, making cars, does not know how to make them.
The Big Q: Why?
The Big A: Baffling!
Tesla, Inc is a very tiny speck on the windscreen of the world’s real carmakers, and that is the existential problem that Tesla Bulls avoid.
The company is so small and owing to its extraordinary cash outflows getting smaller minute by minute.
Tesla’s $55-B market cap is is beyond rationalization ply impossible, there is no rhyme, reason or math for that.
The Key issue facing Mr. Musk’s rentier (Marxist capitalized) business Tesla, is the company’s reliance on off-line assembly to produce its vehicles.
Off-line assembly aka rework, is very costly, as the core profitability of any automaker is based on line speed, i.e. the number of units produced per shift. Tesla’s then are essentially hand made cars from used parts.
Last week it was reported that Tesla’s use of re-manufactured parts does not reconcile the notion of re-manufactured parts being used on new vehicles, it has been rumored that Tesla actually does this.
Tesla’s Fremont, Calif. assembly has a really bad reputation in the auto industry, and its JV with Toyota (NYSE:TM) was a rank failure.
The more you study Tesla, the more you learn that Tesla’s management does not how to build a car and make a profit.
OK, people have told me that Tesla’s Model S has performed well in quality and owner satisfaction surveys, but the Model X has not, and it seems that once T-EV leaves the Fremont plant it is overall fine and dandy, until something happens, like an exploding battery, or a faulty plug in.
Getting from the idea of a revolutionary EV to the finished product is supposed to produce a ROC (return on capital) Tesla never has done that basic business task.
But, Tesla has produced negative EBITDA in Q-4 for the 2nd frame running. and that is just unheard of in business of automobile manufacturing.
Ferrari (NYSE:RACE) produced an EBITDA margin of 30.8% in Y 2017 and soon-to-be-public Aston Martin posted a 23.6% figure.
In contrast Tesla’s $1.6-B of negative EBIT in Y 2017 was matched by the company’s $1.6-B of depreciation and amortization.
So, Tesla’s EBITDA margin in Y 2017 was Zero, NADA! It is not sustainable.
Tesla burned $3.5-B of cash in Y 2017, and with the Model 3 still in what has been dubbed Manufacturing Hell.
Archive this: there will be No improvement at Tesla in Y 2018.
Let’s look at Tesla’s role in disrupting the world of automotive/truck transportation
If you believe in electrified power-trains then look to the most advanced automaker in the world Volkswagen (OTCMKT:VLKAY) masterful presentation in Berlin last week on VW’s plans to introduce an army of battery-powered vehicles by Y 2025.
If you believe in the future of autonomous driving lookr to General Motors presentation from December on GM’s strategy to exploit autonomous mobility.
These are fact-based presentations, but the stock market does not always consider facts and especially in Tesla’s case that is a fact.
The facts about Mr. Musk and Tesla is that he and the Company do deliver unfulfilled promises constantly, and Mr. Musk is a faux-visionary who has never proven that he can produce a profit making cars, let alone produce a positive return on that capital.
If you believe in that stuff then perhaps if you do not already, you should own Tesla stock.
But, remember that all rentier businesses fail, Tesla, like its namesake Nicola Tesla, will too.
|NASDAQ:TSLA||325.6||15 March 2018||-1.03||329.38||332.85||321.1||6,564,800|
|HeffX-LTN Analysis for TSLA:||Overall||Short||Intermediate||Long|
|Neutral (-0.19)||Bearish (-0.26)||Bearish (-0.29)||Neutral (-0.03)|
Have a terrific week