April 25th, 2019

Yesterday Tesla reported Q1 earnings and today the stock plummets to 52 week low.

They were negative over $700 million.

Going back a couple quarters Elon stated that he thought they would be profitable in all future quarters, with perhaps the exception of this quarter.

This quarter they had a bond debt to pay. $920M.

There was a deal in place where if the stock price was at $350+, then half of the repayment could be made in stock.

That would have made the repayment $460 million instead.

Even if Tesla was able to keep their stock price above $350, they would have still posted a loss. But they may have tried harder.

I think Elon wanted to. I think he wanted to close all the stores and save a bunch of money. Enough money to make it balance or come close.

But no matter what, it would have been a shitty quarter. Worse than last time. The shorts will ensure the market will react to that. Figuring out Model 3 logistics across Europe and China was never going to be as seamless as delivering in Cali.

So, why lose a little? Why fire a bunch of people and close a bunch of stores? Why not just write off this quarter and make it a total failure... on paper.

The optimistic way to look at it is that Tesla paid off a huge debt. If Tesla is going to post great quarters, they will need to pay off all their debts so quarters like don’t happen ever again.

When asked why Elon doesn’t want to raise capital on the earnings call, he pointed out that they did raise $500M in China.

USD is the worst currency for Tesla. Every other country would be ecstatic to build Tesla products, get the jobs, and other benefits of having a Gigafactory. The countries Tesla goes to have so far been receptive to provide money to build a factory. Albeit that is only US and China so far. It is an incredible feat that Tesla was able to start Giga construction in China for only $500M. Maybe they will raise another $400M from China to keep it going as rapidly as it is. Maybe Tesla wont need to.

The outcome of this quarter is that TSLA has taken $960M steps towards being less dependant on USD.

And yes, TSLA was a hit today. And it will be hit again every debt repayment until there are none. At which point, it will be all proft. And with Gigafactories popping up, I value TSLA = $250 x (#gfs)

Where #gfs represents number of profitable Gigafactories.

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ABOUT THE AUTHOR:
I am TSLA Long. Model 3 Owner. Brother of a Model 3 owner. Son of a Model S owner. I have reservations for Slate Roof and Cybertruck. I am a Tesla speculator and fanboy. I am not a financial advisor. Investing in anything comes with inherent risk. This is not financial advice.