'Exponential Growth': Tesla's Scale, Ambition Hurts Bears After Another Big Quarter

Tesla Inc. TSLA beat analyst estimates when it reported fourth-quarter earnings after Wednesday's close.

On the conference call, CEO Elon Musk touted how Tesla electric vehicle demand is the highest in the world, despite no advertising spend and production facilities running at comparable speeds.

Accelerated Production

Musk and CTO Zach Kirkhorn discussed meeting backlogs and demand; in response to Gene Munster of Loup Ventures regarding the Cybertruck, Musk said, “Demand is far more than we can make in … three or four years.”

Musk added that to meet demand, pressing matters like increased battery production capacity, as well as growth in the number of facilities and localized inbound supply chain flows will need to occur to make operations sustainable.

ARK Invest CEO Catherine Wood, an outspoken proponent of Tesla, told Benzinga that to scale operations and meet demand, Tesla may have to vertically integrate.

“They’d have to almost buy a lithium mining company in order to accomplish this,” Wood said.

Wood told Benzinga back in November her fund has a $6,000 price target for Tesla. Her primary reasons include battery costs, artificial intelligence and autonomous driving data.

See Also: Analyst Acknowledges 'Rude Awakening' On Tesla, But Remains Cautious

‘Spending Money As Fast As We Can’

“We’re spending money efficiently, and we’re not artificially limiting our progress,” Musk said on the call. “In line with that, it does not make sense to raise money at this level."

Tesla is more efficient with its expenditures, allowing it to further innovate and improve production of underlying technologies.

One of Tesla's innovations includes the solarglass roof. Musk said the company is working hard to take on the roofing market, so that homeowners will soon have the option to have a roof that generates power.

ARK Invest’s Industrial Innovation analyst Sam Korus told Benzinga that power generation is key in sustainability of ownership and bodes well with Musks effort to increase production of affordable cars.

“Scale and ambition -- they are at roughly 35 gigawatt hours today and Musk is talking about getting to a couple thousand gigawatt hours,” he said. “That’s a massive increase in scale.”

Powertrain Is ‘Pretty Damn Good’

On the conference call, questions came up regarding durability and practicality.

Musk told investors EPA numbers are outdated and that both the Model X and S have better range, as the core battery cell chemistry has improved: “It won’t be long before the Model S has a 400-mile range,” he said.

In comparison, on a single charge, the $100,000 2020 Porsche Taycan has approximately a 200-mile range.

See Also: A Bull Vs. Bear Take On Tesla's Stock

Too Much Skepticism?

Since the company's third-quarter earnings release last October, Tesla's stock has risen in value by almost 130%. Benzinga asked ARK’s Wood about the incredible run.

“What’s striking to us -- still -- I just looked at the Buys, the Holds, and the Sells on Tesla on Bloomberg, and the ratio has gotten worse,” she said. “Today there are 17 sells, 9 buys. You would have thought, given the sales numbers that they put out, that someone would have flipped. Instead, two people flipped from Buy, to either Hold or Sell after two hours.”

According to Wood, Tesla’s run is in no way indicative of what happened during the dotcom bubble.

“This is an exponential growth company. We’ve lived in a linear growth world for so long. With the law of large numbers pulling growth rates -- this is a prime example of exponential growth.”

She added: “We’re probably in one hell of a bull market that will be sustained because we're climbing an incredible wall of worry.”

Tesla's stock traded around $643.25 per share Thursday morning.

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Posted In: EarningsLong IdeasNewsPrice TargetTop StoriesExclusivesAnalyst RatingsTrading IdeasInterviewARK InvestCatherine WoodElon MuskGene MunsterLoup VenturesSam KorusZach Kirkhorn
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