Market guru Jim Cramer appeared on CNBC on Thursday with some high praise for Tesla Inc (NASDAQ:TSLA) CEO Elon Musk.
“I remember when I was a hedge fund manager, there periodically would be these companies where they knew how to handle the shorts,” Cramer said on CNBC’s Squawk on the Street. “No one has been as masterful. Elon Musk is masterful. He’ll take the shorts up there with his rocket to Mars.”
I’m not sure if being good at dodging shorts is masterful or not but he’s certainly been able to maintain a positive storyline despite all of the problems and setbacks Tesla’s experienced over the past year.
Perhaps Elon Musk is a really a cat and has nine lives because I’m not sure you ever have a strategy for a certain type of investor.
Sure, you can present your company and product or service in a way that puts you in the best light, but I don’t think you can ever do anything to dissuade the shorts except deliver tangible results.
Is Elon Musk Delivering Results?
He’s made a lot of promises. Some have come true, others have not.
Google the words “Tesla Model 3 production target” and you get 56,900 results. There aren’t many storylines that have occupied investors like this one.
“If there’s a greater investor obsession at the moment than whether it will produce 5,000 or 6,000 or however many cars the analysts feel it needs to produce in a week to be successful financially, I haven’t seen it,” I wrote May 1 just before Tesla released first-quarter earnings. “In early April, I suggested Tesla was trading at bargain prices, given the progress it was making regarding weekly Model 3 production. The automaker produced 9,766 Model 3s in Q1 2018 including two consecutive weeks at 2,000 or more.”
The shorts see a company that continues to fail to meet a simple production target of 5,000 Model 3’s per week. Musk sees a company that is mere days from hitting 6,000, the new target he set in April.
We’re halfway through June and there’s no sign of Tesla hitting 6,000. However, he did say at the company’s annual meeting June 5 that 5,000 was “quite likely” by the end of the month.
“The biggest constraint on output is general assembly,” Musk said. “We can probably get to 5,000 a week with the current two general assembly lines. But with the third one, I’m highly confident that we can exceed 5,000 units per week.”
Tesla’s stock is up 25% since June 5; the short’s are getting squeezed with losses of approximately $2.4 billion in June alone. With $12 billion in short positions, there are going to be some really unhappy investors, not to mention poorer, if Musk says on July 2, “We hit 5,000 Model 3’s last week.”
America Needs Elon Musk
Back in 2012, I wrote about why I thought America needs more Teslas. That’s especially true now that Donald Trump is undertaking a global trade war.
The U.S. economy needs innovators like Elon Musk. Heck, he just went and let go 9% of the company’s employees and some of those let go were still able to speak positively about the man and his dream.
“The people thanking Elon for the opportunity to work there are authentic. It’s unprecedented,” said Gene Munster, a managing partner at venture capital firm Loup Ventures. “One of Tesla’s secret weapons is the shared vision of clean energy, as well as how much people believe in Elon Musk and his leadership. It’s a unique asset for Tesla.”
You better believe it is.
The shorts just don’t get it. I’m not talking about the financials, which are awful. I’m talking about people wanting to believe in something bigger than themselves.
Elon Musk gives them that. Those let go will carry this experience with them for the rest of their lives. Like the commercial, the experience is “priceless.”
Managing Expectations
Here’s the thing Cramer’s got right: Elon Musk is masterful but it’s not about handling the shorts. What Musk does really well is managing expectations.
When Tesla announced its Q1 2018 earnings in early May, the fact it produced 2,000 vehicles in two consecutive weeks was like it had successfully climbed Mt. Everest. Never mind that it was supposed to hit 5,000 by the end of 2017.
Musk does a wonderful job of minimizing the negatives while accentuating the positive.
If Tesla announces in early July that it produced 4,000 Model 3’s for two consecutive weeks in June, do you think investors will care that it wasn’t 5,000 or even 6,000?
Hell, no. A lot of people didn’t think it could deliver 2,000 Model 3’s for two consecutive weeks.
He sees the glass full, not half empty.
The End Game
There may come a time very soon when the rubber hits the road and money truly becomes life or death, but that’s not where we’re at just yet.
Elon Musk and Tesla might ultimately fail but this is one man and one company I just couldn’t bet against. It’s kind of like how people must have felt about Henry Ford at the turn of the 20th Century.
Masterful indeed.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
