by Ian Harvey
July 29, 2018
Tesla Inc. (NASDAQ:TSLA) continues to collect huge amounts of debt, without generating an operating profit; the prediction for the earnings release on August 01 is expected to be a larger loss than previously; and as well, competition is ramping up in the autonomous driving space.
And Elon Musk, the Tesla boss, less than two weeks after being pressed to apologise for calling one of the divers who helped rescue the soccer team stuck in a cave in Thailand a “pedo” on Twitter, has now deleted a series of tweets that included one featuring an image of Miley Cyrus twerking at the 2013 MTV Music Awards.
The post elicited several comments calling it offensive and requesting that Musk apologise for it. He hasn’t, but on Thursday the controversial tweet disappeared from his feed.
For further insight check out the previous article “TESLA – Likely To Continue Its Downward Spiral!” to get a more in-depth understanding of the situation and the reasoning for the option trade.
Steve Eisman, the hedge-fund manager and investor who bet against dicey mortgage products engineered by some of the world’s biggest banks in 2008, is now betting against Elon Musk’s Tesla because he doesn’t see value in the company and doesn’t believe they’re doing enough in autonomous driving.
“I don’t see the value in Tesla,” Eisman said. “We’re short Tesla,” meaning he is betting that the price of the company’s shares will fall over time.
The Earnings Predictions……
Analysts are expecting a consensus loss of $2.68 a share in Tesla’s coming quarter, compared with an adjusted loss of $1.33 in the second quarter of 2017.
Eisman said Tesla’s quarterly results could be a make or break point for the electric-car manufacturer whose founder has been involved in a number of controversies in recent weeks and has been described by critics as a distraction for Tesla.
The 15-year-old, San Carlos, California-based Tesla hasn’t been a top performer with shares down nearly 14% in July; and is looking at a decline of 4.6% year-to-date; compared to the Dow Jones Industrial Average which has climbed 4.9% in July, and is on track for a year-to-date advance of nearly 3%.
Tesla/Musk have suppliers concerned due to the huge amount of debt -- with long-term debt expanding from roughly $2.5 billion at the end of fiscal 2014 to $10.8 billion at the end of 2017.
Current analysis from CreditRiskMonitor notes that Tesla has a Frisk score of “3”, which puts the company firmly within the red zone with a two to four per cent chance of bankruptcy in the next 12 months.
And further concerns have arisen with new questions about the recent disclosure of an effort by Tesla to renegotiate agreements with suppliers to achieve price reductions on work already underway.
With Tesla/Musk in so much debt, very shaky ground exists and this portrays quite a scary situation!
Action To Consider…..
This is the options trade mentioned in the previous article; and is still applicable as volatility continues to rattle stock direction…..
OPTION TRADE TO CONSIDER: Buy TSLA AUG 17 2018 275.000 PUT at approximately $10.00.
Sell price is left to your own judgment.
Tesla is a “cult stock” and Musk uses Twitter to help manipulate the prices. Many retail investors are longtime fans of Tesla's electric vehicles, but are buying and holding shares of the company on blind faith despite the fact that Tesla has such a large debt and will likely need to raise capital this year.
Many investors are not in tune with the company’s financials or the continuing problems, and this tends to skew the correct movement of the stock price after earnings are announced!