Analysis: Did Tesla's earnings call and stock surge save Musk and skip skeptics?


2017 Tesla Model 3 "first production" car, in photo tweeted by Elon Musk on July 9, 2017

2017 Tesla Model 3 "first production" car, in photo tweeted by Elon Musk on July 9, 2017

Investors Wednesday heard enough good news from Tesla to ignore worries about the company's appetite for cash and hurried production pace to rally the stock to its biggest one-day gain in roughly 5 years. By Friday morning the stock had surged above $350 from $300 on Wednesday afternoon.

That led the sizable number of short-sellers who borrowed the stock at a relatively high price hoping to sell it at a much lower price and pocket the difference eating crow. Estimates by analysts peg the short-sellers' losses this week at more than $1.5 billion.

Still, some analysts seem unfazed by the automaker's recent surge and point to the company's larger balance sheet as proof.

Tesla Motors CEO Elon Musk at Tesla Store opening in Westfield Mall, London, Oct 2013

Tesla Motors CEO Elon Musk at Tesla Store opening in Westfield Mall, London, Oct 2013

“It’s pounded my fund’s performance over the last 18 months…but I don’t let the stock price change how I feel about the company,” Mark Spiegel, a hedge fund manager, told The Wall Street Journal.

The company's burn through more than $700 million in cash and rising competition from automakers such as Mercedes-Benz and Jaguar are proof of its precarious position, Spiegel said. Even though Tesla's revenues beat most of Wall Street's estimates, there's not enough long-term hope for Spiegel to change his mind.

“I saw nothing in (Wednesday’s) report that I didn’t expect or that changes my opinion about the company,” he said.

He may not be alone.

Tesla Model 3 all-wheel drive Performance rolls off a new assembly line in a temporary structure

Tesla Model 3 all-wheel drive Performance rolls off a new assembly line in a temporary structure

Reuters reported Thursday that analysts haven't yet seen enough covers to bail out of those short-sells, which would indicate that skeptics seem bent on Tesla's long-term fall from investors' graces.

“With such a large price move on the open, most short-sellers that are looking to cover are waiting for a retracement before placing buy-to-cover orders,” Ihor Dusaniwsky, head of research at S3 in New York, told Reuters.

Other analysts, including Bank of America's John Murphy, still target the company's stock much lower. Murphy told U.S. News & World Report that his outlook and target price only improved from $190 to $200 after the call and that the bank's position reaffirmed its "underperform" rating.

Despite those targets, many investors seem undeterred and have buoyed the company's coffers in the last few days at a record pace.

The good news for Tesla has bigger ramifications for its future product portfolio and viability.

The company's debt looms large on the near-horizon. Within 16 months, Tesla has roughly $1.7 billion in debt payments due that are tied, in part, to its stock price.

Without optimism from investors and their cash, Tesla's production upgrades, future products, and proposed construction of facilities in Europe and Asia may have to wait.

 
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