Published: Thu, April 05, 2018
Money | By Hannah Jacobs

Investors raise bets against Tesla shares

Investors raise bets against Tesla shares

Tesla Inc. shares surged Tuesday after Silicon Valley vehicle maker reported first-quarter production and delivery numbers that missed expectations, but said it would not need to raise more money this year given the progress made during the quarter.

But on Tuesday the California-based firm said it had made more than 2,000 Model 3 vehicles in the past seven days - still some way below Tesla's original target of 5,000, and short of the 2,500 per week it had since scheduled for this March, but a healthier figure than many analysts had suspected. In the next seven days, we expect to produce 2,000 Model S and X vehicles and 2,000 Model 3 vehicles.

Tesla announced a production target of 5,000 Model 3 sedans per week by the end of this year's second quarter.

Tesla noted The quality of Model 3 coming out of production is at the highest level we have seen across all our products.

The first-quarter deliveries totalled 29,980 vehicles, of which 11,730 were Model S, 10,070 were Model X, and 8,180 were Model 3.

Mr. Musk has been glorified by investors and the media as the one with all the answers: previous debt raises and equity issuances to fund Tesla, a company which has been churning through an wonderful amount of cash each year, have only sped up.

This story will be updated. And since the investment vehicles he's suggesting will be used to bet on a further Tesla stock plunge, he's labeled them "crash puts". However, he cautions that concerns about production milestones not being met could make raising cash even more hard for Tesla.

Considering that Tesla made only 9,766 Model 3 units in 1Q, that meant Tesla couldn't even come close to sustain a 1,000 per week rate in 1Q, and of course it sold even fewer Model 3 units. Consumer Edge Research analyst James Albertine, who remains bullish even after Model 3 production missed his estimates, said, "Our hope is that subsequent ramps in production may be easier". "Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt", he tweeted.

Analysts from brokerage Evercore ISI said a run-rate of 2,000 per week, while short of the 2,500 target, was better than most on Wall Street had expected and clearly showed progress versus where the company was at the start of the year. Model 3 production did increase exponentially, the company points out, with a fourfold increase over the previous quarter.

For now, though, Tesla's solar energy business is taking a back seat to the Model 3.

Moody's Investor Service downgraded Tesla's debt, stating, among other reasons, the pressure on the company for liquidity because of its negative cash flow.

Musk also spoke of how he had trusted Doug, but now the policy had to be changed in order to benefit the company. Over the weekend, Tesla revealed that the driver had been using Tesla's autopilot software feature at the time, raising more questions about the safety of the company's self-driving technology.

Considering that Q1 sales were flat compared to Q4 but interest expense will likely be up a lot - higher borrowings and higher interest rates - we should see the interest expense per vehicle sold increase from just under $5,000 per auto, so somewhere north of $5,000 per vehicle.

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