Tesla Finds a New Gear
A victory for underdog Tesla, with its stock being charged up 21% yesterday. Elon Musk has silenced the FUD by delivering a blowout quarterly update about his electric car company, which in the beginning, he said only had a 5% chance of survival.
Cutthroat competition and fragile financials have kept Tesla on life support since its first day. Musk started PayPal prior, and in 2008, invested all his earnings from that success into keeping Tesla alive. Yesterday, that personal gamble and all the production line overnighters, bore fruit.
Tesla soared 21% as quarterly earnings figures painted a rosy new picture of the firm. Musk’s Q3 slide deck rewrote the risk-reward profile for investors, and over a billion dollars wagered against the car company in short trades went up in smoke!
Victory for investors was won on the company’s income statement. After sales hit the top-line, investors hope as much of that money trickles down to the bottom-line as possible. For Tesla, there was a promising pile of excess cash sitting at the foot of the income statement yesterday, after costs had bitten. Musk will put all of it towards exciting new projects and debt repayment (he has no choice!).
Some believe that with profit proving elusive to Tesla, Musk had attempted some sleight of hand on Wall Street. Car delivery numbers look more important than conventional numbers, with investors hooked on his 104,000 car promise. The stock moves on that number. However, yesterday’s profit-based results mark an “I told you so” moment for Tesla backers. The green car company is revving now, it’s in the fast lane, and it’s bearing down on complacent auto incumbents. Watch out!