The just-concluded Tesla (NASDAQ: TSLA) conference call was supposed to be a simple Q1 result discussion for the company. However, it instead became a discussion about Tesla's future as a carmaker. CEO Elon Musk started the discussion by making some surprising announcements.
The first is that he wants Tesla to be the best manufacturer in the world. In line with this, the initial goal of selling half a million cars by 2020 is being pulled forward to 2017. These statements did not come with any concrete steps as to how the targets will be met, which is quite troubling, Seeking Alpha reported.
These highly aggressive targets gravely concern investors. Company goals, just like investor information, have been vague and are subject to wild interpretations—so much so that a whole “cottage industry” around Tesla forecasts has been created.
The ramp up was met with resistance and Tesla stock closed at 219.58, a 0.8% increase. However, it is worth noting that Tesla also almost hit a 2-year low last February when its stocks closed at about 141.
Investors reported that Joseph Spak, RBC Capital Markets analyst, believes the ramp up will bring big challenges and increased risk for Tesla. Spak had lowered his price target for the company from 252 to 242.
He said, “We are all setting aggressive internal and supplier goals, but as an investor, we believe these targets should be moderated....We were always below Tesla's vehicle delivery targets of 500,000 by 2018 and a million by 2020, but after speaking with industry contacts and reconsidering our model, we are tempering our delivery forecast to account for a slower Model 3 ramp.”
Tesla has raised an additional $1.4 billion to the $1.44 billion in cash and equivalents at the end of its March 31 balance sheet to help achieve its target. Spak's forecast is that Tesla will go through $1.8 billion in 2016 and $1.3 billion in 2017. This would mean that Tesla will require additional capital by 2018.
Spak wrote, “For now we put another $1 billion equity raise in 2017.” The lackluster opening of the Model X had serious cash flow effects and Tesla cannot afford to have another similar opening in the near future. At the moment, there are around 400,000 reservations for the Model 3.
