Why Tesla Might Be The Future, But Is A Myth Today
Tesla Motors Inc (NASDAQ: TSLA) recently came out with its first-quarter earnings, which were slightly better than the Street's estimates. While the Street was expecting the company to post a EPS loss of $0.50 on revenue of $1.04 billion, Tesla posted an EPS loss of $0.36 for the quarter on revenue of $1.10 billion.
However, the results and the current fundamentals of the company don't seem to impress hedge fund manager Jim Chanos (founder and president of Kynikos Associates). Chanos was on Bloomberg TV recently to discuss why he isn't bullish on the company for the short term.
Higher Cash Burn
"Well, I'm a little more skeptical on Tesla," Chanos said. "And again we focus not on the personalities, but on the facts.
"The more cars he [Elon Musk] sells right now, the higher the cash burn. That's not a position you want to be in."
Chanos continued, "In addition, his gross margins in the auto business, ex-tax credits, are dropping. Not going up. And as an auto manufacturer, you want economies on scale. You want your margins to be flat to up."
Not Economical Enough
He explained, "And then there's just this nonsense, quite frankly, about the battery. Last night on the call he basically, Mr. Musk referenced the fact that the smaller of the power wall units is really not economic. He acknowledged that in the U.S. – it's really only marketing in Germany and Australia [sic.].
"And we had done some work on that last week and penciled out the numbers and realized right away that neither of the units are really economic, with exception maybe of peak hours in California.
"So this story is all about 2020, 2025 – the gigafactory. And I just keep pointing out that analysts who have very precise valuations for 2025 in this company can't seem to get the current support right," Chanos concluded.
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