Will Tesla Keep Sticking It To Doubters?

| About: Tesla Motors (TSLA)


A major bear argument for Tesla was trying to cast doubt on the Panasonic/gigafactory agreement.

We learned yesterday, via the Nikkei, that this agreement appears to be finalized.

Tesla will continue to execute, and I remain bullish on the name for the long-term.

Earnings are due out this Thursday, after the market close. All eyes will be on production in Europe and China.

I've been bullish on Tesla (NASDAQ:TSLA) for a while now. It's one of the only stocks that I've advocated deserves its extremely high price/earnings multiple in today's marketplace. My arguments for this have included the company's potential to revolutionize the automobile industry and the executives' ability to seemingly take on whatever task they have ahead of them.

So far, so good. Tesla has grown and expanded relatively quickly, and is now looking at introducing its third generation of models after "nailing it" with the Model S.

While we'll be offered a bit more insight as to Tesla's production numbers coming up in the company's earnings, I wanted to briefly touch on yet another goal the company has set, and another goal met.

Recently, I wrote a piece about Tesla's CTO. I watched him give an impressive presentation of the company's battery technology, the evolution of it internally, and what sets Tesla apart from other people trying to work with lithium ion. What I concluded was that Tesla is at least 5-6 years ahead of everyone else. This could go well to explain why the company doesn't mind giving out its patents. Aside from the presentation, I highlighted some bullish sounding statements coming out of JB Straubel's mouth - notably, things like:

"I'm bullish this can scale faster than the car market."

"I can't disclose our exact price and cost figures on batteries, but it is at a cost point that we realized, is imminently competitive on different markets outside of cars."

"The economics are going to drive this forward much quicker than anyone thinks."

"We should all be thinking bigger."

-JB Straubel, Tesla CTO

One of the major bear arguments we had been hearing for a while is with regards to the company's gigafactory. I spent a good amount of time in my last piece talking about how crucial Tesla's battery technology is going to be - not only for vehicles, but for the rest of the lithium ion world. Tesla is years ahead of competition when it comes to harnessing the power of a lithium ion battery. This going to make them an asset, both with vehicles and otherwise.

Bears had been arguing that the company's gigafactory is going to be a joke - that it'll be too big, too massive and too expensive to be beneficial for the company. Notably, many bears harped on the fact that the company didn't have an ironclad agreement to work with Panasonic (OTCPK:PCRFY) on battery technology. but rather, an LOI that was holding the two together for the last couple of months.

Yesterday, however, Seeking Alpha reported that the companies seemed to have tied the knot:

  • Shares of Tesla Motors (+2.5%) spike higher after Nikkei reports the automaker struck a battery plant deal with Panasonic.
  • An official announcement from the companies hasn't been made yet.

This goes to forward my argument of "I'm going to trust Tesla until it gives me a reason not to." So far, the company just seems to be doing everything right.

It won't be long before we're offered more detail, either. The company is set to report this Thursday after the market closes. Despite some recent suggestions that the company may not meet its Q2 production goals, I remain bullish on the company heading into the report.

According to Marketwatch, here's what the consensus estimates are for EPS and revenue:

Earnings: Analysts surveyed by FactSet expect Tesla to report a second-quarter net loss of $55 million, compared with $31 million in the year-ago period. Adjusted to exclude one-time items, the electric car maker is seen posting a profit of 4 cents a share, compared with 20 cents a share in the year-ago period.

Revenue: Analysts forecast Tesla to report sales of $824 million, compared with sales of $551 million in the second quarter of 2013. For the full year, analysts are looking for sales to hit $3.8 billion.

All eyes are going to be on production and deliveries. The bears are arguing that deliveries in the U.S. and in Europe are starting to stall - bulls are going to be looking to combat that sentiment by hopefully getting a strong demand report from China, the world's largest auto market. Additionally, the company is expected to expand on its coming 3rd generation models and a potential timeline for the Model X.

On the heels of getting the Panasonic deal done and finalized, I continue to be bullish on Tesla here and wish investors the best of luck.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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