Saturday, January 11, 2020

Elon Musk: The man OR myth worth the hype?

Let’s start the article with the EPS of Tesla. For a while, you may take EPS synonymous with the profit if EPS gets too technical. The snapshot of the Bloomberg Terminal does show that the company has made profits in 5 quarters after it went public in 2010. Out of 40 quarters (10 Years), the company has made a profit just 5 times (The fifth upward stick is missing from the chart. It was in 2013). There are multiple companies or organizations that are just bleeding money for the last many quarters and we wouldn’t be talking specifically about them but the bottom line remains that Mr. Elon Musk is inching towards to become the ‘Real Iron Man’ of this era. Hence, it becomes more important to understand and know more about the revolution that is underway for a decade now.  
(Note: The title of ‘Real Iron Man’ was first used by Bloomberg on Jun 10, 2014, to refer Mr. Musk)

There are 10 points that summarise Mr. Musk and the company itself. In the latter points, I have even mentioned Indian automobile companies justifying the header image with the data file too.
1.    The electric-car maker posted a surprise profit of $342 million in the third quarter of 2019. Wall Street had expected the company would post a net loss as big as $257 million. Tesla (TSLA) shares soared by up to 20% in after-hours trading. It marked the first quarter Tesla was profitable since the company posted back-to-back profits in the second half of 2018. Before that, Tesla had posted profits only twice since it went public in 2010 — once in 2013 and again in 2016.
2.    Tesla delivered a record 112,000 vehicles globally during the fourth quarter, significantly topping Wall Street estimates and achieving CEO Elon Musk’s year-end sales goal.
3.    Many analysts does believe that Tesla is ‘OverValued’. They are quite cautious about the company as they still haven’t settled for something that could be relied upon for a steady flow of revenue.

4.    The Tesla Gigafactory in Shanghai opened last year as China's first wholly foreign-owned auto production plant since the government eased regulations, and the sedans delivered this week were Tesla's first made-in-China cars to be shipped out to customers. The Chinese government lifted restrictions on foreign ownership for auto manufacturers in 2018. Previously, foreign carmakers could only produce and sell in China through joint ventures with Chinese companies.

5.    Influence of charismatic CEO: In the recent Bloomberg survey ( _November_2019, a question was asked to around 5000 Tesla owners. Question: Did the opinion of Elon Musk influence purchases? 55.4 percent responded affirmative (30.8 percent- strongly agree, 24.6% agree).         

6.    Controversies: Elon Musk on 07 August 2018: Tweet: ‘Am considering taking Tesla Private at $420. Funding secured’ His tweet “set off a trading frenzy,” and pushed Tesla’s stock price up more than 6 percent, forcing Nasdaq to halt Tesla trading for 90 minutes until the company gave an official response. The company’s stock price hit the intraday high of $387 before closing at $379.57 on the day of the tweet. It's currently trading at 478.15 10 Jan, (7:59 pm GMT-5, 10 January, 2020·The US Securities, and Exchange Commission (SEC) sued Mr. Musk after his tweet. The SEC later claimed that the tweet was “false and misleading.” 

Outcome: Mr. Musk was directed to step down as chairman. Paid a fine of 40 million. Appointed 2 independent directors; Was directed to get his tweets reviewed before posting.
Other incidents include him smoking weed on Joe Rogan Podcast and calling Vernon Unsworth, the diver, in July 2018, a pedo guy in one of his tweets.

7.    China can be the swing factor for Tesla: The forecasted growth for the EV share for China is quite high. It is as high as 27 percent. Also, Tesla delivered its first China-made cars to its customers and it has come when Mr. Musk has been very popular in missing his deadlines.  
Tesla Killers in the Chinese market are  NIO, XPENG, GEELY, BYD

8.    The combined valuation of Tesla has eclipsed the total market cap of Ford and General Motors combined.

9.    The combined valuation of Tesla has eclipsed the total market cap of Ashok Leyland, Bajaj Auto, Tata Motors, Maruti Suzuki and Mahindra & Mahindra combined.

{Just for info: In the middle of these, Morgan Stanley Sales & Trading, US, has picked Maruti Suzuki India as one of the world’s top 20 stocks. According to a recent report released by Morgan’s trading arm, India's car market leader is best positioned when demand picks up.}
10. Tesla has become the 3rd most valuable company in the world after Toyota ($228Bn) and Volkswagen ($100.8Bn).

Tesla stock has doubled since October 2019. It may have eclipsed the valuation of major automobile firms but the fact remains that sale wise, it accounts for just 3 percent of joint vehicle sales volume (Ford and GM). The execution risk more than ever. And the fact remains that the company is about to report its 10th annual consecutive net loss (In the first para we had talked about quarters)
Till then, let’s see how things unfold for Tesla and the legend, Mr. Elon Musk.\

The excel sheets have been attached to this link for further references: File
The Article may be downloaded as pdf from the following link

2.    Bloomberg Technology – Taylor Riggs

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