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Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Elon Musk’s Actions Are Making It Harder to Support Tesla (TSLA), But the Stock Still Justify a Buy


By Gene Munster

Elon’s actions are making it harder and harder to support Tesla (TSLA) as a company. His actions directly affect Tesla’s share price because Elon is Tesla. That said, we still believe there is more upside to shares. 

Musk smokes marijuana during a live interview on the “Joe Rogan Experience” podcast

 

A Few Takeaways

  1. Big picture: regardless of Musk’s actions, if Tesla can sell more than 60,000 Model 3s per quarter at a gross margin of 20% or greater, the company will be successful. This factors in demand, production, and profitability. We expect the company to sell 55k Model 3s in the Sep-18 quarter.
  2. We think Tesla will successfully ramp the Model 3 to profitability and reach escape velocity. However, in the 15% chance that Tesla needs to raise money, yesterday’s interview just made it harder.
  3. Musk is not going to be conventional. Breaking the mold is part of his PR strategy. While we believe Tesla’s board is trying to put controls in place to limit behavior like this, it’s clear Elon has a different plan.
  4. At times, Musk appears to be working against himself. At the core, we believe he wants to prove his doubters wrong, but many of his actions strengthen the case against him. If he wanted to prove them wrong with actions he would delete Twitter, drop the Unsworth conversation, and not use recreational drugs in a public setting.
  5. The use of recreational drugs, legal or not, goes against the unspoken rules of being a public CEO. 
  6. Reading into the Sep-18 quarter, Musk’s seemingly relaxed attitude implies the business is performing as planned, and results will likely be in line with guidance. Sep-18 would be the first quarter for Tesla to turn a profit. That said, given Musk’s unpredictable actions, investors won’t feel comfortable about profitability until the company delivers on 2-3 quarters in the black.
  7. If Elon’s relaxed attitude is a short-term positive, it is at least balanced out by the departure of chief accounting officer Dave Morton as a potential long-term negative. While Morton reiterated that Tesla’s books are in order, any sort of C-level departure is a negative.

 

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. 

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