Tesla shares jump after it convinces investors of positive cash flow
The shares were up 10% in pre-market trade, however, Elon Musk’s conciliatory tone was even more remarkable for some
Bengalaru — Shares of Tesla jumped 10% in pre-market trade on Thursday, after the company convinced investors that it was able to produce positive cash flow and turn a profit, and CEO Elon Musk apologised for past incendiary remarks.
In a conference call on Wednesday, Musk addressed the company’s largest quarterly loss to date, saying the electric vehicle (EV) maker would not need to raise more cash and that capital expenses would be slightly below $2.5bn in 2018, lower than most analysts’ estimates.
However, it was his remorse for prior remarks to analysts that highlighted the call. Previously, he insulted some analysts — turning off investors and shareholders, and knocking $2bn off the company’s market cap. "I would like to apologise for being impolite on the prior call. Honestly, I think there is really no excuse for bad manners. I was kind of violating my own rule in that regard."
In the previous quarter, Musk called questions posed by two analysts "boring" and "boneheaded", and refused to answer them. This quarter, not only was Musk’s tone non-confrontational, but he apologised to both analysts.
"Elon’s tone was generally improved versus last quarter, which may seem trivial, but Tesla stock has become somewhat of an Elon sentiment gauge," RBC analysts said. The results could be a boon for the stock, as it is set to gain about $5bn at the open.
Musk reiterated a target of producing 6,000 Model 3 sedans a week by late August. After Tesla produced 5,000 a week in July following several delays in reaching that target, analysts were concerned whether it could maintain the production rate.
"After three quarters where investors have been in the dark with respect to estimating Model 3 volumes and margins, quarter two felt like there might finally be some light at the end of the tunnel," Evercore analysts wrote. "Come quarter three, we may even be able to see the end of the tunnel, or Elon’s ‘production hell’."
Tesla had a record loss of $718m in the second quarter, but investors and analysts focused on the positives, and, more importantly, on Musk’s behaviour on the conference call. At least two brokerages raised their price targets on the stock.
Shares of the company rose 10% to $331 before the bell.