Tesla Motors (TSLA) reports its financial results after tomorrow’s close. While Bears focus on demand for its cars, Northland Capital’s Colin Rusch and Noah Kaye think investors should focus on production:
Associated Press The bear argument on Tesla appears focused on lack of demand which the company has repeatedly indicated was not an issue. With Elon Musk's tweet last week about sales being up 65% Y/Y, we believe the unknown variable at present is production runrate after the company's upgrades to its manufacturing lines. That number is challenging to triangulate and we have no indication yet on disappointment relative to production levels. We expect the company to comment on progress toward its 2,000 vehicle/week production rate exiting 2015. We believe the company has the potential to ship and record revenue on ~70k vehicles which would translate into ~$7B in revenue vs. the street at $5.4B. Management continues to believe demand is not a constraint for growth…
Rusch and Kaye also wouldn’t be surprised if the Street were shocked by Tesla’s spending. They explain:
We believe [Tesla] has continued to invest in operations to service customers and lay the foundation for long-term growth with product development. As much as we believe investing in growth is important for the company, we would like to see some operating leverage as the company ramps sales. One of the key elements to our thesis on Tesla is the company's effective deployment of capital and the potential to develop new products cost effectively. We continue to believe
management are good stewards of capital, but believe the street has modeled spending too low and that prolonged OpEx growth will begin to drive questions about long-term profitability.
Shares of tesla motors have dropped 0.8% to $240.78 at 10:17 a.m. today.
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