Overall, I think the earnings report was a positive. I’d give it a 7 out of 10. The reason being is because anything not very negative is actual positive to Tesla at this point. They are at a crucial juncture of ramping Model 3 and the absence of bad news means things are going well. Cash balance going into Q1 2018 was $3.4 billion, which is very healthy and rather surprising. They also raised $500M+ is a lease securitization deal in Q1. So it looks like Tesla is not in need of an urgent capital raise. However, I wouldn’t rule out a capital raise in the next several months as Tesla might opt to increase their cash cushion.
Elon re-affirmed that the long-term competitive advantage of Tesla will be their factories and not their cars. This is a key point to understand about Tesla. By massively improving manufacturing efficiencies via engineering, AI, 3d printing, and robots, Tesla will be able to drive down costs faster than any other auto manufacturer, thus giving it a long-term sustained competitive advantage.
Because there’s such a large short interest, this exacerbates market moves in times of uncertainty. In other words, there is more volume of stock available (since shares are taken out short as well) and this increases the ups and downs of the stock. Second, on a fundamental basis much of TSLA’s value is based on what Tesla will accomplish in the future. Thus, any change of predicted plans can make a big difference on how people perceive TSLA’s value today. Third, TSLA (like other highly volatile stocks) tends to go as high as it can until it hits a road block and then goes as low as it can until it can hit a road block. It’s similar to a huge fire that keeps going in one direction until it can’t any more, and then goes the other direction. On top of this, people are able to take on margin to buy and sell TSLA stock. So, when the stock price drops suddenly then people who bought TSLA on margin often get margin calls, and they are forced to sell the stock, thus causing the stock to drop more. Sometimes this happens until the price is low enough where it’s very attractive to large buyers who come in to scoop up bargains.
In some ways, I think the volatility in TSLA stock isn’t helpful to Tesla or to individual investors. Many individual investors get freaked out by a sudden 15-20% drop, or overly enthused when the stock jumps up suddenly 15-20%. It’s an emotional roller-coaster for many.
Personally, I look at the daily stock price as an emotional tug-of-war between emotional investors on both sides of the market. While the short-term price is determined by many factors beyond Tesla’s control, the long-term trajectory and ultimate price of the stock will be determined by Tesla’s long-term execution and performance over time.
Roughly two years ago SpaceX made history with the first landing of a orbital’s first stage on land. This was the key piece to SpaceX’s ultimate mission to make humans a multi-planetary species. What yesterday’s successful launch of Falcon Heavy showed was that SpaceX is on an inevitable path to send people to Mars. Now more than ever it’s clear that SpaceX is on a roll and that momentum will lead to amazing space ventures that many thought was only for the imagination.
What makes SpaceX special is the combination of a ridiculously ambitious goal (making humans multi-planetary) and the practical means and methods to achieve that goal. SpaceX believes that if they harness the intelligence of the brightest engineers and commit to ruthless iteration and constant improvement, then the end result will be achieving what many people think is impossible.
In the same way, Tesla shares the SpaceX ethos. Tesla has set a ridiculously ambitious goal of transitioning the world to sustainable transport and energy, and they’ve committed to making that happen by bringing together the best engineers they can find and working ruthless toward constant iteration and improvement.