Tesla (TSLA): The Questions the Auto Empire Does Not Want to Answer

RBC Capital's Joseph Spak spits back a round of questions at TSLA's CEO Elon Musk following a dismissive Q&A session went awry.


RBC Capital analyst Joseph Spak is out with a cheeky letter and “invitation” to the captain of the Tesla Inc (NASDAQ:TSLA) helm, CEO Elon Musk. This is a sidelined analyst who may enjoy the finer things in life, including musing about the electric car giant’s “big picture” and the prospects for what this empire could realize. In fact, that is precisely what renders the stock a “fascinating company to cover,” as far as Spak is concerned. That said, the analyst has a lot of questions for a tech story that has left him with skepticism overriding his level of intrigue for Tesla’s potential.

As such, the analyst reiterates a Sector Perform rating on TSLA stock with a Sector Perform rating on TSLA stock with a $280 price target, which implies a 7% downside from current levels. (To watch Spak’s track record, click here)

Musk had cut off Spak in the first quarter earnings call, dismissing the Q&A queries as “so dry, they’re killing me.” While Musk later took back his move to avoid answering analysts’ questions, acknowledging it was “foolish” on his part, Spak is back with a vengeance.

Whether Tesla’s leader finds these questions “dry, boring or short-term focused” or not, Spak demands answers: “If the 2019 converts remain out-of-the-money, how do you plan to address the capital structure? Are more Model 3 reservation holders than expected deferring and if so is it for the AWD variant? Is that what supports higher ASP commentary? How much of an impact is the temporary additional labor and how quickly can you ween off it? How long do you need to see sustained Model 3 production before reevaluating capex plans? With no room at Fremont and significant capex only starting next year, how do we gain confidence that Model Y production begins early-2020?”

“Last week was a doozy, huh?” the analyst audaciously poses to Musk, noting that in the days following their lackluster conversation, he has come to his own conclusions. Spak’s verdict: “Tesla remains an amazing company with a compelling long-term opportunity and an incredible list of accomplishments already under its belt. But I continue to hold Telsa (and every company I cover) accountable for implementing a strategic vision that aligns with an ability to execute at scale.”

Spak is not the only analyst with questions brewing about the Tesla empire. According to TipRanks analytics, apprehension is the predominant sentiment on the Street. Out of 20 analysts polled in the last 3 months, 4 are bullish on TSLA stock, 9 remain sidelined, while 7 are bearish on the stock. With a loss potential of nearly 5%, the 12-month average price target stands at $287.07.

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