Tesla Inc (NASDAQ:TSLA) CEO Elon Musk is going to announce earnings May 3 on a high.
On Monday morning, SpaceX — which is not owned (yet) by Tesla — launched a secret payload for the U.S. government and then landed the rocket safely, intact, near its Cape Canaveral launch pad. The launch was due to use a rocket that had previously gone into space, which would be a major milestone for cutting the costs of space flight.
Musk can be excused for feeling on top of the world right now.
And as for his publicly traded brainchild? TSLA ebbs in and out of its position as the most valuable U.S. car company, ahead of General Motors Company (NYSE:GM), more valuable than Ford Motor Company (NYSE:F), and three times more valuable than Fiat Chrysler Automobiles NV (NYSE:FCAU).
However, success is a double-edged sword.
Can Tesla Deliver?
Analysts are expecting a loss of 67 cents per share, about $110 million, on revenues of $2.52 billion for the quarter ending in March, although the “whisper number” for the loss is surprisingly much higher — 91 cents per share, or $150 million.
That may prove unimportant. What’s $40 million between friends?
Far more important is the decision to scrap prototyping of Tesla’s Model 3 production line, and instead order production equipment directly to meet a self-imposed production deadline of September.
The Model 3 is supposed to quintuple Tesla’s production and make its top line look more like those of the car companies whose market cap it’s leaving in its wake. But if Model 3s need repairs or must be replaced, if recalls and warranty repairs even approach the levels on existing TSLA vehicles, the stock’s price could collapse.
That is because investors would be left holding a company producing less than one-tenth the number of cars of its chief rivals, but with the same manufacturing and profit problems.
The ultimate promise of Tesla is not that it can produce a cool electric car, but that its robot factories can produce vast numbers of cars, at lower costs, with higher quality, than any other car company.
Analysts are divided on whether Tesla can deliver on this promise, with five screaming “sell” while eight now say “buy” and one-third sit in the middle, at “hold,” not knowing what to think.
That’s the kind of skeptical setup — a “wall of worry” — that has led shares to run up 46% so far this calendar year, because there are shorts still left to squeeze.
Elon Musk Is on Top of the World
InvestorPlace writers are as divided as anyone else on whether Musk can deliver.
I admit to leading the skeptics, but there are plenty of believers in our ranks — people I deeply respect like Chris Lau, the folks at Zacks and Richard Saintvilus, who calls Tesla a “no-doubt buy.”
I may be wrong. I’m not telling you to short TSLA stock. I’m just saying I wouldn’t buy it here.
This is because I know there are two kinds of movie characters to be found in Elon Musk on his present high.
He could indeed be “King of the World,” as director James Cameron proclaimed himself after winning the Oscar for Titanic, a statement he later justified in launching the Avatar franchise.
On the other hand, I keep thinking of James Cagney in the 1949 classic White Heat. “Made it, ma! Top of the world” he screams, just before his character is blown up trying to escape from a burning oil refinery.
Right now, investors want to believe Elon Musk is Cameron. I want to believe Musk is Cameron. But if he can’t successfully scale production as promised, he may have been Cagney all along.
Dana Blankenhorn is a financial and technology journalist. He is the author of the political polemic Saving Trumpistan, Restoring Democracy, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
