Thursday, February 2, 2017

"Tesla: Now Comes the Hard Part" (TSLA)

Following on my mini-rant-immediately below- about short-seller Andrew Left and his "lets pretend I didn't say that" approach to market communication, specifically Tesla and NVIDIA, fairness dictates I acknowledge a couple of the biggest concerns of the market.

First up is the execution risk in the simultaneous ramp-up of battery production in Nevada and Model 3 vehicles in California.
Today the stock is up $2.40 at $2.51.64.

From Barron's Stocks to Watch, Jan 31:
After Donald J. Trump won the U.S. presidential election, nearly everyone assumed that Tesla Motors (TSLA) was toast. But like many of the assumptions made about the market and the election, the common wisdom was flat out wrong, and Tesla has gained 28% since the day before the election, despite an initial drop.

The big gain has been attributed to Tesla’s U.S. manufacturing, something that could benefit the company in President Trump’s “America First” world. Oppenheimer’s Colin Rusch and team have decided it’s time for a closer look and decide it won’t be that easy from here:
With Tesla shares rallying 30%+ since the closing of the SolarCity acquisition and nearly 20% YTD (vs. S&P 500 +2.6% YTD), we believe it is a good time to consider where the company is and where it is going over the course of the year. We believe consensus is that Model 3 first shipments will begin in 3Q17 and shares will rally into that event....MORE
Secondly and more importantly is the financing gap that we've been harping on for the last year.
Tesla will need a minimum of $3 billion and some estimates go as high as $12 billion to complete the build-out of the gigafactory; the ramp-up of the SolarCity plant in New York, the second gigafactory initially rumored to be built in Europe but now in the U.S. according to one analyst, the cost of funding the operating losses of both SCTY and TSLA and the hundreds of millions that will be needed for working capital as Model 3 production ramps.

On the plus side Mr. Musk has done some under-the-radar financing stuff that didn't require public offerings of securities and bought the company some time:

Dec. 27
Oops, Missed One: Tesla Had Another $241 Million Cash Infusion We Didn't Mention (TSLA)
Following up on ""Panasonic to invest over $256 million in Tesla's U.S. plant for solar cells" (TSLA)", this would increase the cash immediately available to Tesla to around a billion. Still short of our estimate of their need but getting closer.

I'm assuming this had something to do with Renewable Energy Certificates but didn't see an SEC filing from Tesla/SolarCity that would provide more details. We'd also want to know the capitalization rates applied to the underlying residential leases to know if this was a fire sale or not but again, nada....
Dec. 27 
"Panasonic to invest over $256 million in Tesla's U.S. plant for solar cells" (TSLA)--UPDATED
Combined with the expansion of their credit lines the company has now raised 3/4 billion of the estimated $3 billion immediate need and $6-12 billion 5-year need....
Dec. 21
Tesla Increases Available Credit Lines After Saying No Fundraising Needed In Q4 (TSLA)

Tesla Analyst "Almost Certain" The next Gigafactory Won't be in France — or Any Other European Country (TSLA)
"France’s Economy Minister Visits Tesla in Bid to Woo Musk" (TSLA)
Tesla: "The Gigafactory Has Been Activated" (TSLA)
"2017 Is the Make-or-Break Year for Tesla’s Gigafactory", Musk To Speak at the Plant Tomorrow (TSLA)