Tesla shares charged up by Musk's positive production forecast

Fredrick Soto
August 2, 2018

The results marked a critical moment for a $50 billion company long believed to be on the brink.

Tesla's improved revenues helped the bottom line, but were offset by expenditures for severance pay after the company laid off 9 percent of its workforce in June and by expenses incurred in building the new assembly line, among other things.

"We certainly could raise money, but I do not think we need to", Musk said. Despite this, the company has reiterated CEO Elon Musks promise to post a profit in the third and fourth quarters. Mr Musk then took the first two questions from two analysts he was harshest with last quarter - Sanford C Bernstein's Toni Sacconaghi and RBC Capital Markets' Joseph Spak - and offered personal apologies. He also said people who are interested in making video games should consider applying to Tesla.

That's less of a burn than analysts expected, and it means Tesla is under less pressure to seek more financing.

The company ended the quarter with $2.8 billion in cash, compared with $3.5 billion in the prior quarter. The stock has slumped 19 per cent since a 2018 high of $370.73 in June. While it's no secret that the Model 3 ramp-up got off to a much slower start than Tesla initially promised, the company during the last week of June did manage to boost Model 3 production up to 5,000 units/week. The company said it aims to reach 10,000 a week "as fast as we can".

Cash from Model 3 sales is key to holding off more borrowing.

Musk also stated that Tesla was hiring video game developers to build games which integrate with the Tesla's touchscreen, the driver's smartphone, and the vehicle itself.

"From an operating plant standpoint, from [sic] onwards I really want to emphasize our goal is to be profitable and cash flow positive for every quarter going forward", Musk said.

Musk himself has garnered headlines in recent months for all the wrong reasons, including after calling a hero of the Thai cave rescue a "pedo". In addition to all these issues, the company is finally facing competition from the auto industry.

David Einhorn's $5.5 billion Greenlight Capital hedge fund lost 18.3% in the first half of 2018 while the benchmark S&P 500 was positive.

Tesla also said it was working on a new version of its Autopilot semi-autonomous software that would have greater safety features.

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