I was hopeful to gain insight into Tesla’s fair value from the company’s earnings announcement. No such luck. The value is still based on speculative growth options whose value depends more on sentiment than hard analysis. The big questions remain unanswered. Do a vast number of Americans really want an all electric sedan? What price are they willing to pay for it? Can Tesla profitably produce the cars at that price? If so, will it cannabalize the Model S? What are the cash flow implications for building, servicing and powering all those cars if the Model 3 is a success? None of these questions were answered. What’s worse it looks like it will be six months, at least, until we start to learn the answers.
In the meantime, there were some curious financial details associated with the announcement and the manner in which Tesla “beat” the streets earnings forecast. Those will be addressed in an upcoming post.