When we reported on the latest Tesla results last night, which showed the company losing $330 million in the quarter, or about $13,000 per car, while burning over $600 million in cash, one particular statement in Elon Musk's letter to shareholders caught our attention:
"Moving past Q2, particularly as Model 3 becomes available, one of our challenges will be to eliminate any misperception about the differences between Model S and Model 3. We have seen a belief among some that Model 3 is the newest and more advanced generation of Model S. This not correct."
Subsequently, Musk devoted a substantial amount of time to this odd topic - one would think Tesla's rich, sophisticated clients, who spend over $50,000 on a luxury car know how to differentiate between the two - on the conference call, while keeping any discussion of what really concerns investors, the details around the Model 3 launch, to a minimum.
This morning, with the stock tumbling over 6%, Tesla investors are "feeling some disappointment" as Bloomberg kindly puts it, after the company offered few details about the production of its much-hyped Model 3 car. And after listening to CEO Elon Musk speak at length about customer confusion regarding the Model 3 and Model S, some analysts worry there may be some cannibalization of higher-end model demand by Model 3 buyers.
Here are some choice excerpts, courtesy of Bloomberg.
RBC (Joseph Spak)
- TSLA seems to be spending a lot of time talking about customer confusion around Model 3 not being a better Model S; that confusion may have hurt demand for Model S and Model X
- “For Model 3 we are not overly worried about demand, more about supply”
- Sector perform, PT $314
COWEN (Jeffrey Osborne)
- Sees investors “somewhat disappointed” as TSLA provided little insight on Model 3 ramp or Model S/X orders
- Customer confusion regarding Model S vs Model 3 raises concern that either Model 3 will cannibalize Model S sales or customers who reserved Model 3 may be disappointed when the final product is not a cheaper, next iteration of Model S
- TSLA’s expectation of ~100k Model S/X run rate going forward fell below Cowen’s expectations
- Underperform, PT $155
UBS (Colin Langan)
- Expects stock to slightly trade down on miss and increased cash burn in 2Q
- Sell, PT $160
PACIFIC CREST (Brad Erickson)
- Demand cracks clearly forming, but Model 3 still backstops TSLA; TSLA now saying 100k S and X cars may be the right number going forward vs years of commentary about 100k-150k/year
- Sees Model 3 struggling to get up to intended run-rates; expects quality issues given pace of production ramp that could damage the brand
- Sector weight
PIPER JAFFRAY (Alexander Potter)
- Model 3 production timeline progressing as predicted by co.; says “this alone will probably prove sufficient for maintaining TSLA’s current valuation”
- All eyes on Model 3 this year, “but after that, it’s hard to guess where TSLA could go next"; with an ‘‘endless number of projects’’ for TSLA to pursue and related ambiguity, it’s hard to build a multi-year financial projection
- Overweight, PT $368
The stock, at least as of this moment, is down nearly 6% and offering BTFDers a good opportunity to engage in their favorite activity.