An opportunity to buy? – The crazy Motley

The actions of Tesla (NASDAQ: TSLA) were criticized last week, tumbling by about 10%. Achieving the target production rate of 5,000 copies of the Model 3 per week has not impressed Wall Street, investors worry about whether this herculean end-of-quarter surge is sustainable.

After Tesla burned $ 1.4 billion last quarter, some analysts and short sellers compared the current situation of the automaker to General Motors and Enron few before their collapse and their eventual bankruptcies. Is the decline of last week the sign of worse times? Or is it an opportunity to buy?

For investors willing to tolerate volatility, last week's liquidation may represent an attractive entry point. Here are three reasons why the future of Tesla is probably brighter than recent headlines suggest.

Model 3. Image Source: Tesla.

1. Deliveries are booming

While Tesla is certainly behind its initial production targets, investors should note that shipments are still in full swing. In the second quarter, total vehicle shipments increased 36% sequentially and 85% from one year to the next. And thanks to Tesla's higher production rate and its 11,166 model 3 vehicles and 3,892 S and X model vehicles in transit at the end of the quarter (compared to only 2,040 models 3 and 4,060 S and X models at the end of the quarter). first trimester). Annual growth in vehicle deliveries is likely to be even stronger in the third quarter.

Model 3 shipments, in particular, are skyrocketing. Model 3's third-quarter shipments of 18,440 units were up from 8,182 shipments in the first quarter of 2018 and 1,542 shipments in the fourth quarter of 2017.

Tesla's vehicle shipments are expected to continue to increase quickly. Total production of second-quarter vehicles was up 55% sequentially and Tesla said that it should be able to increase model 3 production by 5,000 units a week by the end of the second quarter at 6,000 units a week at the end of August. sales can have a considerable impact on a company's finances. Indeed, its recent performance in increasing production and deliveries to the management forecast that it will achieve positive cash flow and positive net income in Q3 and Q4. Demand is out of the charts

Consumers want the 3 – 420,000 model of them to be exact. Of course, Tesla said its deposit-supported model 3 bookings fell back to a level just above 450,000. But this is understandable because Tesla has done very little to market the Model 3.

With nearly half a million bookings despite the company's unobtrusive efforts to generate appetite for the vehicle, Tesla does not worry about the request. "When we start offering customers the opportunity to see and test the car in their local store, we expect our orders to grow faster than our production," Tesla said in its second quarter update on deliveries and production. "Two-engine, twin-engine, two-engine, three-engine performance 3-engine performance cars will soon be available in our stores."

Model 3. Image Source: Tesla.

3. Tesla could easily raise capital

Finally, Tesla could give a boost to its balance sheet if it wanted it by raising capital. With a market capitalization of $ 52 billion, the general sentiment of investors is optimistic – although the decline last week suggests the opposite. This premium valuation means that it could raise significant capital by selling equity. While this would dilute shareholder ownership, it would also mitigate balance sheet concerns while giving it more flexibility to capture significant and timely opportunities.

Capital raising is not always a good option. But when capital increases accompany a rise in sales and exuberant demand, they can ultimately benefit shareholders in the long run.

Combining its recent ability to significantly increase deliveries, the ability of Model 3 to stem hundreds of thousands of bookings. capital when it is needed, and the signs of growing more and more that the future of the automobile is electric, the liquidation of last week looks like an overreaction.