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Tesla Motors: dream still intact

Tesla Motors: dream still intactYou can get lost listening to Elon Musk and hazily start buying Tesla shares. The chief executive spent the quarterly results on Tuesday hinting that his electric vehicle company would launch an Uber competitor, predicting that in 15-20 years driving your own car would be a purely sentimental option, “like owning a horse”, and promising that Tesla itself would be delivering fully autonomous vehicles long before that.

Even the cool-headed analysts at Goldman Sachs have models for Tesla’s future — nicknamed “Elon as Steve Jobs” and “Elon as Henry Ford” — which each show the company shifting more than 3m vehicles a year by 2025 on revenues of more than $160bn.

And so it is unsurprising that Tesla’s shares shot up more than 9 per cent in after-hours trading when the company maintained the bottom-end of its forecast for 50,000 vehicles to be delivered by the end of the year. The dream is still intact.

This is understandably maddening to the shorts — of which there are many — and presumably to the Detroit carmakers. General Motors’ enterprise value is less than three times as big as Tesla’s heady $33bn. Yet GM revenues for the last 12 months are 38 times higher and its net income is $5.4bn, compared with a $675m loss at its electric rival. On Tuesday, Tesla missed earnings estimates. Still the beguiling Mr Musk can paint pictures that keep investors patient.
Tesla Motors: dream still intact
However, there are now two yardsticks that could cause a loss of confidence in the next two quarters. The company needs to ramp up deliveries of its long-awaited Model X vehicle and hit that 50,000 target. Although the market is not heeding it, Mr Musk was already offering excuses: the weather could be bad, car buyers might be away from home at Christmas.

Then there is the cash. Tesla wisely shored up its balance sheet by selling $739m of shares in August. It needed to. The cash burn reached record levels this quarter at almost $600m. Mr Musk now says he “aspires” to be free cash flow positive in the first quarter, ending next March. In February, he had said it would happen late in the third quarter. Satisfaction deferred is the story of Tesla. There still needs to be satisfaction, though, or at least the first glow of it. Fail on shipments and fail on cash flow and patience should run out.

Source: Financial Times
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