Cho Research

About the Author Cho Research

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

There’s No Middle Ground for Tesla (TSLA) Stock


Tesla (TSLA) could finally be turning the corner on profitability as the business is delivering Model 3 in volume. In Q4’18 and Q3’18 Tesla reported two consecutive profitable quarters of $0.78 and $1.75 GAAP Dil. EPS, respectively. What shareholders are hoping for in the next couple quarters is a seamless production ramp for its Model 3 that shouldn’t hamper profitability but should instead drive volume profits at similar margins.

This could be a little tricky, because this year coincides with the launch of the base model, which is priced at $35,000. This price point is crucial, because this segment of the market is where Tesla was supposed to build-up its entry-level segment but got delayed with various production struggles over the course of 2018.

A transition into lower-priced units also leads to the unenviable conclusion that the company has to make cost adjustments everywhere they possibly can. In terms of the vehicle itself, they’ve adjusted the features to match the pricing tiers. At the base model level, the vehicle is just slower, and has less battery range, and you won’t have access to Tesla Autopilot, and you might be tempted to even upgrade the wheels to make them sportier, for $1,500 but even if you don’t, it still looks good for a $35,000 car.

With the announcement of its base model at $35,000 on February 28th, 2019 the company initially announced that it wasn’t going to raise prices, but instead “wind down a lot of stores.” This sounded like a really vague term, but when we fast forward a month later, they mention that they closed down 10% of their store locations, places where they get less car and foot traffic and would shift to a more online model with service centers.

Most car companies still have tons of dealerships out and about everywhere you drive in any major city with big signs and expansive service centers as well. So, it can’t completely bail on the idea of having a store footprint even if it wanted to. What Tesla’s likely abandoning are the non-performing stores with low traffic, and probably a greater shift towards service centers where vehicle maintenance and various other services are actually done. Even the deliveries get picked-up at the Tesla Service Centers, so the emphasis on stores has gone down, they have 378 locations according to their Q4’ call, so maybe they reduced the number of stores by 30 locations at this point. However, they continue to maintain the Service Center count at 120 according to their support website.

So, they might have 250 retail locations they could probably reduce by 50 or 60 locations, but they’ll likely open more service centers in Mainland China where they integrate their Asian supply chain for Asian market deliveries for Southeast Asia like Korea and Japan which they already ship to. So more new openings of Service Centers, but also closings of retail looking stores.

This will help trim costs down following the announcement of the Model 3 base model at $35,000.

Following efforts to consolidate stores, the company is shifting towards an on-demand vehicle servicing model. They believe 80% of incidents can be resolved with a mobile technician driving to the car to repair it on site or deal with the situation. Hence, they might not need as many locations globally to fully saturate the auto market with reasonable customer service.

Tesla also announced a 3% price increase across all Model 3 variants besides the $35,000 Base Model. People who purchased the Model 3 up until March 20th or Wednesday this week purchased at the same price tiers but following the March 20th cut-off there’s roughly 3 fiscal quarters where an added 3% price increase could improve profitability. This might spark a lot of debate in the coming quarters, as the profit narrative seems to depend heavily on improving operations and pricing adjustments.

 

Read more on TSLA:

 

Stay Ahead of Everyone Else

Get The Latest Stock News Alerts