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The Crowd Is Starting to Turn Against Tesla (TSLA)


By Justin Brill

Last Thursday was not a good day for electric-car maker Tesla (NASDAQ:TSLA).

Shares of our favorite whipping boy plunged as much as 8% Thursday following the company’s latest quarterly “earnings” announcement Wednesday night.

While the company did report better-than-expected revenue of $3.41 billion for the quarter – compared with estimates of $3.22 billion – there was little else to celebrate. As the Wall Street Journal reported…

Tesla burned through cash at a greater rate than analysts expected during the first quarter, intensifying pressure on the Silicon Valley auto maker to raise more capital if it continues to struggle ramping up production of the Model 3 sedan.

The company’s free cash flow widened to about a negative $1 billion after burning $277 million in the final three months of last year, a figure that was unusually low thanks, in part, to delays in spending and customer deposits…

Tesla posted a loss attributable to common shareholders of $710 million, its fifth consecutive quarter of record losses. Tesla’s per-share loss of $3.35 was narrower than analysts’ average expectations, according to FactSet, but those projections were lowered significantly in recent months.

In short, despite repeated promises to the contrary, the company is still falling laughably short of its production targets. Meanwhile, it continues to hemorrhage money at a mind-boggling rate.

Of course, none of this is new

Tesla and its “Steve Jobs-wannabe” CEO Elon Musk have been overpromising and underdelivering for years. Yet analysts and shareholders alike have largely given them a pass.

That appeared to be the case again this quarter. Shares initially rallied in after-hours trading Wednesday following the results. But they turned sharply lower during the company’s post-earnings conference call.

During the 90-minute call, Musk was unusually arrogant and dismissive, even by his standards. And suddenly, the world is taking notice. As financial-news network CNBC reported Thursday morning…

Elon Musk’s peculiar post-earnings call was the talk of the market Thursday morning, with one analyst ranking it among the strangest moments of his career.

“Tesla’s 1Q18 analyst conference call was arguably the most unusual call I have experienced in 20 years on the sell-side,” Adam Jonas, equity analyst at Morgan Stanley, said in a note to clients. “Many investors we spoke with post the call agree.”

Amid questions over the electric car maker’s cash burn, its relationship with SpaceX and production of the Model 3, Musk cut off the questioners and in some cases chastised them for asking things he didn’t like…

He dismissed one question from a key analyst as “boring,” then took more than 20 minutes of questioning from a 25-year-old YouTuber. “We’re going to go to YouTube. Sorry. These questions are so dry. They’re killing me,” Musk complained.

In fact, it was so bad, even some of the most-bullish Tesla analysts are now questioning the company’s future. More from CNBC…

Consumer Edge analyst Jamie Albertine, who is bullish on Tesla and has a price target of $385, said… Musk’s behavior on Wednesday’s conference call is a big issue.

“We totally disagree with the way Elon handled himself,” Albertine said on CNBC’s “Squawk Box” on Thursday. “It’s an incredible red flag and we are re-evaluating our stance on the company as a result.”

The “bottom line” is simple, Tesla is a terrible business. And it is now running dangerously low on cash.

Despite Musk’s reassurances, its only real hope for survival is to continue to raise new capital from investors. Suddenly, that’s looking far less certain.

 

 

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