- I'm skeptical of a note out yesterday suggesting Tesla may not meet its Q2 production goals.
- My sentiment is that the company doesn't "miss" until the results come out and they show that the company "missed".
- My man crush on Elon Musk continues to gestate, I remain bullish on Tesla through Barclay's note.
No grown man truly ever has plans of turning into an Elon Musk fanboy - at my old age, I usually "curb my enthusiasm" about stuff for the most part and generally have become a skeptic by nature. That's not necessarily the prescription for someone to just blindly kiss the ground that a CEO walks on. And, trust me, I'm not at those levels with Elon Musk yet.
But, I'm getting closer. And I admit it.
For a guy like myself that loves fundamental investing, this is about as crazy as I get. And I admit that, too.
And for the millionth time, the reason I am that close with Tesla (NASDAQ:TSLA) is because since the company's inception, Mr. Musk has done precisely nothing to give me the impression that he doesn't deserve my trust, or the trust of his shareholders. Fundamental based analysts and shorts continue to ask the question of how Tesla's valuation can be so sky high and detached from its fundamentals. I have often commented that Tesla is one of the very few "momentum" names that I think actually deserves the valuation that it has.
Holy hell has it been a ride, too. Tesla has absolutely scorched anyone that has tried to short the stock since its inception.
And, again I offer the answer to that question: Tesla is serving up more than fundamentals, they're serving up intangibles. They're meeting goals they set out for, they're rewriting the age old automotive industry, and they've created a relationship between the company and its shareholders where there's a mutual respect. While Ford (NYSE:F) and GM (NYSE:GM) are both doing a great job in terms of sales nowadays - are they what you think of when you think about what the auto industry is going to look like in 2020? Or, perhaps, would the name Tesla start to poke its way into the picture? It certainly would for me.
Whether or not shareholders are going to hold the company accountable when things do not go their way, however, remains to be seen. We're still waiting on that defining moment where Tesla fails to meet a goal it sets out or inadvertently does something that causes a sell-off in the stock and a loss of confidence. To see then whether or not shareholders tart to hold some feet to the fire (in terms of governance and the stock price movement) is another story for another day. And, we'll cross that bridge when we get to it (if we do).
To expand on the title, I do want to state that this is in no way an attack on Brian Johnson the analyst. I don't really know his track record (nor am I interested, for the most part) and I don't have any personal beef with him. What I want to do though, is make the points that:
1. Vehicle total analysis have often been wrong or misguided
2. Elon Musk has likely always got a little something up his sleeve to deliver to shareholders.
With that being said, it was reported yesterday that Tesla has a chance of missing their Q2 vehicle delivery targets. This report came on the heels of Barclay's analyst Brian Johnson's note on the company. Seeking Alpha reported yesterday:
- Tesla Motors has targeted 7,500 deliveries during Q2, but it will need a big June to get there, Barclays analyst Brian Johnson deduces.
- Barclays estimates that North America deliveries in April and May totaled ~2,400 units, and implies total worldwide deliveries ex-China for the first two months of the quarter of ~3,500 units; if China contributes a modest ~1,000 units for the quarter, it implies that North America and Europe combined need ~3,000 deliveries in June to meet Q2 Model S delivery guidance of 7,500 units.
- TSLA global sales rallied in the final month of each of the last two quarters, and it appears it will need to do so again.
This did well to move the needle back on a Tesla a little bit yesterday - but the stock eventually recovered and continued its ascent upward - much to the chagrin of fundamental shorts like SA Contributor "Logical Thought" - who I can hear gritting his teeth from behind my computer monitor as I work my way through this article.
We have seen people try and pin down Tesla's vehicle sales - including myself - by going through VIN numbers and collecting all sorts of data. The closest I've seen to a full on home run was Nicky Friedman over at the Motley Fool who absolutely crushed an analysis several quarters ago and nailed Tesla's number dead on. Aside from Nicky's analysis, I've seen some people here on SA get close - and some people, including myself, draw offbase conclusions that didn't come to fruition when the quarter ended. The point being, even though it looks easy, it may not be a "slam dunk" when you're trying to predict the outcome of a company who's CEO is a little bit of a wild card himself.
The name Barclays doesn't mean much. And I don't mean that as a stab at the bank (I love my barclaycard) - I mean it as a reminder to any and all readers and investors that analysts are just the same kind of people as you and me. The conclusions they draw, although generally well informed, should be paid attention to - but should not always alter your decision in how you invest (again, myself included). Want proof that Barclays can beef an analysis? Look at this.
Additionally, I'm in no way claiming that Johnson has any stake in the game here, but what I will say is that analysts generally do have some stake in the game somewhere. As I said in "My 17 Definitive Cardinal Rules for Investing Success," you have to understand that most - if not all - of these people have money in the same game they're directing the public's investments on (myself included):
As much as I hate (read: love) to bash Jim Cramer in two successive articles, he's the pinnacle example of this rule. Much of the public was absolutely flattened when they watched his interview a couple of years back on the Daily Show. In this interview, Jon Stewart played back for Cramer a YouTube video of himself openly admitting to making up and disseminating rumors about companies when his hedge fund was short them. This was the public's first glance into the dirty work that goes on behind the scenes at hedge funds; if they knew the down and dirty details, jaws would drop all the way to the ground.
The lesson I hoped the public learned from this is that 95% of the people feeding you advice; whether it's here on Seeking Alpha, on CNBC, or in the Wall Street Journal all have agendas and positions that they're trying to make money on. Believing these people disclose these positions all the time is laughable. Take everything, including what I write, as a sales pitch. Go in as a skeptic and question motives. Again, finance is a lesson in cutthroat 101.
The facts are that analysts often get things wrong - no matter what brokerage they work for - and that I'm not going to let analyst expectations and estimates get in the way of my bullish blinders on Tesla just yet - let's wait and see what the company has to say.
You know, contrarian investing isn't just finding undervalued companies and betting big on their turn around - it's also about taking on a viewpoint that sometimes looks to be in the minority to the investing public. Yes, Tesla looks majorly overvalued from a fundamental standpoint - yes, this analyst probably has his act together and may even be right here - but the contrarian in me loves to keep my bullish sentiment here behind Tesla and Musk until they absolutely give me a reason not to.
I'd take this note with a grain of salt; I remain bullish on Tesla for the long-term and wish all investors the best of luck.