Tesla (NASDAQ: TSLA) stock investors have gotten their fair share of headlines in the past week. Tesla stock hit new 52-week lows after the company missed consensus estimates for first-quarter earnings, revenue and vehicle deliveries — badly.
Source: JD Lasica via Wikimedia Commons
A parked Model S caught fire spontaneously in China. A judge granted CEO Elon Musk another week to reach an agreement with the SEC over Musk violating the terms of last year’s fraud settlement. And Musk surprised almost everybody when he announced Tesla would have at least one million fully autonomous robotaxis in operation in 2020.
But lost amid all the crazy headlines is, perhaps, the most important development for TSLA stock investors — the market no longer cares about anything Musk has to say.
Musk’s Robotaxi Promise
The most mind-blowing thing I witnessed this week is how analysts and investors reacted to Musk’s robotaxi projections. At Tesla’s suspiciously timed Autonomy Investor Day event earlier this week, Musk said the company would have a million Level 5 autonomous taxis on the road in 2020.
Many analysts carefully chose ways to respectfully disagree with Musk’s claims. Tesla bear and former Kase Capital Management hedge fund manager Whitney Tilson was not among those analysts.
“Something’s gone seriously wrong in his brain, causing him to become a reckless, narcissistic brat and pathological liar,” Tilson wrote of Musk.
Wedbush analyst Daniel Ives is more on the diplomatic side. “We continue to feel robotaxis, insurance products, and other endeavors are distractions from the growing demand woes that are not being addressed, which is a critical worry of ours at this juncture,” Ives says.
The craziest thing about the whole robotaxi presentation is how TSLA stock reacted. The day after the promise, TSLA stock was up 0.4%. In other words, not even Musk fanboys take what he says seriously anymore. The market didn’t react. Why?
“You know the saying: ‘Fool me 100 times, shame on you. Fool me the 101st time, shame on me!” Tilson says.
Whether it be vehicle delivery guidance, technological innovations or financial commitments, Musk has repeatedly failed to deliver on his word. He’s even in hot water with the SEC for tweeting “funding secured” for a buyout deal when, in a nutshell, funding was not secured.
Critics even pointed out following the bizarre robotaxi presentation that Musk previously promised back in 2016 to have Level 5 autonomous vehicles on the road by the end of 2017. Incredibly, the market is literally disregarding what Musk has to say at this point.
Analysts Ignore Guidance
Tesla investors got another taste of this indifference to Musk’s word on Thursday. Analysts reacted with skepticism to Tesla reiterating its full-year delivery guidance after missing first-quarter delivery estimates by 17%. Loup Ventures analyst Gene Munster says he thinks “it’s prudent to model for deliveries below the company’s range.” Ives says the company’s guidance “is aggressive” and downgraded the stock.
After months of Musk remaining adamant that Tesla would not need to raise additional capital, he said on the earnings call this week that “there is some merit to raising capital.” Again, analysts like Bank of America’s John Murphy and Morgan Stanley’s Adam Jonas have been telling investors for months not to listen to Musk, and that Tesla needs capital.
One million robotaxis in 2020, at least 360,000 vehicle deliveries in 2019 and no additional capital needed. Funding secured. Tesla stock bears stopped listening a long time ago. This week, based on the stock’s trading action, the bulls have stopped listening as well.
Tesla Stock a Dangerous Short
Investors may finally be wising up to Musk’s game. Unfortunately, there may still not be a good way to profit off of it.
Ives called Tesla’s quarter “one of the top debacles we have ever seen,” yet the stock traded lower by only 4.2% on Thursday. Tesla bears are digging in. TSLA stock has a massive $8.9 billion short interest. Tesla bulls appear to be digging in as well. It’s hard to imagine any other major company getting so many things wrong in a quarter and the stock dropping just 4%.
Tesla bears are taking note. Musk can say anything he wants, the company can miss financial expectations across the board and the stock isn’t dropping like a rock. That’s bound to be scaring the short sellers. Tilson says the stock is headed to $100 per share by the end of the year. I say if this week can’t get it below $245, what in the world would get it to $100? Would Musk need to go on YouTube and smoke marijuana? That incident didn’t get it to $100 either.
In a nutshell, Tesla is a mess. However, assuming it can actually raise additional capital at some point, it seems nothing short of bankruptcy is going to get the stock significantly lower. If the stock bounces on Friday, a wave of short sellers may cover and take profits.
As I said earlier this year, Tesla stock is too bad to buy and too dangerous to short. I would advise traders to take my approach. Just stay on the sidelines and enjoy the show.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
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