As one of the world’s most innovative companies, Tesla Inc (NASDAQ:TSLA) has nearly single-handedly driven innovation and technological advancement in an automobile sector which has been screaming for innovation for some time.
Breaking through paradigms is something Tesla CEO Elon Musk appears to have been born to do. With the company’s recent announcements that it intends to take many more steps into reshaping the entire electric vehicle (EV) industry, investors are left wondering what such creations will mean for TSLA’s bottom line in the years to come.
In late November, Tesla made two announcements which took the market by surprise:
- The company would be introducing an electric Semi truck with the ability to go up to 500 miles on a single charge, and be able to charge 400-miles worth of power in 30 minutes with a revamped supercharger system.
- TSLA would unleash the company’s newest supercar, complete with a $200,000-dollar price tag and the title of fastest production car ever made, able to go 0-to-60 mph in 1.9 seconds.
In spending the time to assess these new technological innovations, analysts have determined that Tesla will be relying heavily upon the internal genius used to bring its current vehicles to market, as the technology to fully recharge a truck carrying an 80,000-lb load in 30 minutes is simply not even close to existing today.
Believers and atheists aside, the church of Musk is alive and well. And so far, the followers of Mr. Musk’s prophecies have certainly come out ahead, despite continued calls for caution amid sky-high valuation multiples.
Sure, TSLA is currently valued higher than Ford Motor Company (NYSE:F). And sure, Tesla only has maybe 6-8 months left of liquidity to survive. But if anyone can do it, it’s Elon Musk.
With a bucket list of action items and nice-to-haves dominating Mr. Musk’s attention span, the reality is that Model 3 production issues and balance sheet uncertainties have begun to surface in the minds of investors, many of whom have begun taking profits at current levels. Some alarm bells should be sounding here.
Maybe the situation isn’t as dire as I’m making it out to be, but I believe Tesla doesn’t have an issue with thriving; rather, it is survival that should currently be the primary concern.
In assessing what TSLA must do to survive then, I am of the belief that the vast majority of what the EV company needs to do boils down to one thing: focus.
With the company in desperate need of cash flow, Tesla’s production team will need to severely ramp up both the volume of vehicles produced as well as operating margins — two variables which remain serious wild cards for fundamental investors concerned about the cash flow side of the equation from the vehicle production side of the business.
With a number of reports coming out indicating significant problems with Model 3 production, dealing with the issues at hand should take precedent over everything else.
If 2018 is a drop-everything-and-figure-it-out year for Tesla, perhaps the world will see an EV semi and a supercar able to go 0-to-60 in less than two seconds. If the company is not able to do anything other than hit a grand slam, however, I fear for its viability.
Bottom Line on TSLA Stock
The ability for Tesla to realize short-term gains from many of the large investments made in labor-reducing robotics and other world-class production methods has yet to be proven.
TSLA may indeed be on the road to achieving rock-bottom production costs and sky-high margins. But until such a reality presents itself, I’m afraid I’m going to continue to count myself in the camp of people who believe that Tesla is/was:
- First to the punch in essentially creating a market segment which was dormant, if not dead, for years
- One of the most innovative companies to exist
- A company whose demise was shaped by its inability to execute as quickly as it could dream