When a company comes out with bad news, supporters of the firm do one of two things – either they come up with excuses or they try to change the narrative. Recently, Tesla (TSLA) announced a massive Model 3 production shortfall, perhaps the most important news the company has released so far this year. Less than two weeks after the bombshell was dropped, we can already see supporters trying to change the narrative to hide the bad news.
Earlier this week, Morgan Stanley (MS) analyst Adam Jonas came out and raised his price target on the stock from $317 to $379. This note was released just after Tesla’s shares had fallen a day prior on Model 3 concerns, and this isn’t the first time we’ve seen Jonas release a positive note right after major bad news from Tesla. Of course, the price target above has moved quite frequently, and it is one of many targets he has on the stock as he also has a bull case target and bear case target that move frequently as well.
Jonas’s argument was based on Tesla’s infrastructure being a key differentiator. He cites the fast-growing supercharger network as the main reason, although he used a supercharger number that was about two months old. Of course, this isn’t really major news, because Jonas used the supercharger network in his argument for a price target raise back in August too. Jonas also famously has valued Tesla’s Mobility service, details of which were supposed to be released this year, at $76 a share. Adam Jonas has had some crazy predictions out there for Tesla, highlighted by that Mobility prediction that he has already admitted may never come to fruition.
Of course, Tesla on its own site says that most charging is done at home; so how valuable is the supercharger network really? Well, the book value was just $236 million, according to Tesla’s most recent 10-Q filing, a tiny portion of Tesla’s $26 billion in assets or $60 billion market cap. Last year, management guided to 300 new supercharger locations and only added 208 new locations. Then, when management updated its forecast this year in April, it guided for almost 10,100 total superchargers by the end of this year. How’s that working out? The chart below tells a stunning story.
Just in the past week or two, Tesla hit the 2,000 supercharger mark in terms of additions this year. As of last Saturday, Tesla needed to add 252 superchargers per week for the rest of this year to hit its goal, despite not having a week over 212 additions all year. In fact, over the past 10 weeks, Tesla had not even averaged 100 new superchargers per week. I don’t see how it is going to do 3,000 new locations in less than three months, especially as some locations start to experience winter weather and the holidays arrive.
Tesla has not only underinvested in the supercharger network in recent years, but it has also pulled back on plans for its sales/service center network, as I’ve continually detailed, and that was another item Adam Jonas has put out there as a huge plus. For a while, service wait times were astronomical, and things won’t be helped by the fact that Tesla issued another recall on Thursday. Maybe the company realizes that the superchargers aren’t the be-all, end-all that supporters claim, since again the company itself says most charging is done at home. Of course, we’re also talking about a network that is still vastly inferior to the ICE/gas station network.
In the end, you always have to dig deeper when looking at those who are clearly supporting the name. It’s obvious that Tesla bulls are trying to change the narrative from the Model 3 flop. Seeking Alpha contributor ValueAnalyst in a recent article on short interest tried to say that Tesla is ahead of schedule for Model 3 deliveries because its guidance was for the end of this year. Well, perhaps we should just review what Elon Musk said about bringing the Model 3 to market back in 2012 on a conference call: I’ve added some bold for emphasis and edited out some unnecessary pieces.
Michael Lew – Needham & Co. LLC
On the last call, you mentioned that you were thinking about a mainstream offering for Gen 3 instead of an updated Roadster. Do you have any update on your thought process there, like what types of market times you are looking for?
Elon R. Musk
I mean, it’s very aspirational at this point, because our intention is focused on the Model S and on our key powertrain partners, Toyota and Daimler. So, I mean, late 2015 would be the earliest. 2016 is probably most likely, but something like that.
While Tesla unveiled the Model 3 last year, market time implies vehicle being available to consumers, which did not happen in 2016. That goes perfect with the statement that customers would be getting the first Model X vehicles in mid-2014 – Musk said that on the same earnings call. Well, most consumers that put down an interest-free $1,000 loan to Tesla are hoping that they can even see their Model 3 before the end of 2018 at this point. In the end, when the bad news comes out, just change the narrative and recycle old news about the supercharger network. If this isn’t grasping at straws, I don’t know what is.
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