Tesla crashes after latest report

Model Y to become available in the U.S. in Fall 2020

Model 3 to become available in China in Fall 2020

Tesla (TSLA) shares are sharply lower in Thursday’s trading after the electric car maker posted a loss that surprised investors.

Tesla (TSLA) reported a 2nd Quarter June 2019 loss of $1.12 per share on revenue of $6.3 billion. The consensus estimate was a loss of $0.52 per share on revenue of $6.4 billion. Revenue grew 58.7% on a year-over-year basis.

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Tesla shares tumble following its results, Stockwinners

The company said in it continues to expect positive GAAP earnings in the third quarter. The current consensus estimate is earnings of $0.27 per share for the quarter ending September 30, 2019. Tesla reported 95,356 vehicle deliveries in Q2 and production of 87,048 vehicles in Q2.

Tesla CEO says Model Y production ramp will be ‘significantly faster’ – Musk cites parts compatibility of the company’s existing models. 

Tesla CEO Elon Musk wrote in the company’s Q2 update letter, “This quarter, we are simplifying our approach to guidance. We are most focused on expanding our manufacturing footprint in new regions, launching new products and continuing to improve the customer experience, while generating and using cash sustainably. Local production and improved utilization of existing factories is essential to be cost competitive in each region.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 to become available in China, Stockwinners

We remain on track to launch local production of the Model 3 in China by the end of the year and Model Y in Fremont by fall of 2020. We are also accelerating our European Gigafactory efforts and are hoping to finalize a location choice in the coming quarters. We are working to increase our deliveries sequentially and annually, with some expected fluctuations from seasonality. This is consistent with our previous guidance of 360,000 to 400,000 vehicle deliveries this year. Additionally, we expect positive quarterly free cash flow, with possible temporary exceptions, particularly around the launch and ramp of new products. We believe our business has grown to the point of being self-funding. We continue to aim for positive GAAP net income in Q3 and the following quarters, although continuous volume growth, capacity expansion and cash generation will remain the main focus. Our 2019 capex is expected to be about $1.5B-$2.0B, a reduction from prior guidance. We continue to find opportunities to improve capital efficiency and shift cash outflows to future periods. This estimate includes the development of our main projects, on the timelines referenced, and to expand our Supercharger and service networks.”

TSLA shares are down $36.90 to $228.50

Model Y to become available Fall 2020, Stockwinners

ANALYSTS’ COMMENTS

Barclays

Neither revenues nor earnings were “anywhere near a record” in Tesla’s Q2 results, which “calls into question the growth story,” Barclays analyst Brian Johnson tells investors in a research note. The analyst believes Tesla’s loss in Q2 “should mark the top of the current ‘swing trade.'”

The results should temper bullish expectations for profit leverage, says Johnson, who reiterates an Underweight rating on the shares with a $150 price target.

Canaccord

Canaccord analyst Jed Dorsheimer lowered his price target on Tesla to $350 from $394 following Q2 results that were roughly inline with his expectations.

The analyst said its free cash flow suggests the company has a bit more time to grow into its profitability expectations. Dorsheimer maintained his Buy rating on Tesla shares.

Credit Suisse

Credit Suisse analyst Dan Levy notes that Tesla posted a Q2 EPS miss. Broadly, while Tesla has maintained its narrative, the analyst expects the stock to be under pressure near-term, as expectations had risen post the Q2 deliveries release earlier this month. Levy reiterates an Underperform rating and $189 price target on the shares as the Q2 results reminded him of the challenges ahead for Tesla in gross margin, especially as it relates to Models S/X. While Tesla has maintained its delivery guidance, he believes the company will be challenged to meet it given challenges to S/X volumes and the phase-out of the U.S. EV tax credit.

Model S interior, Stockwinners

Jefferies

Tesla last night reported a “challenging set of numbers,” although its pre-restructuring loss was in line with consensus estimates and its free cash flow better with a $600M operating inflow, Jefferies analyst Philippe Houchois tells investors in a research note titled “Q2 Challenging but Still Encouraging.”

Tesla’s vehicle gross margin improved but remains low for sustainable profitability at this stage, adds the analyst. Further, he believes e. JB Straubel moving to an advisory position adds to fears of “executive fatigue.” Houchois keeps a Buy rating on Tesla with a $300 price target.

JMP Securities

JMP Securities analyst Joseph Osha lowered his price target on Tesla to $337 after its Q2 results, saying the company’s revenue was “solid” but gross margins disappointed even in the absence of reduced regulatory credits.

The analyst adds that the output of 87K cars was below capacity, which is a positive because of “low utilization” of its Model S and X, but notes that the “fixed-cost asset under-absorption” suggests the company is struggling with reducing Model 3 costs as expected.

Morgan Stanley

Following Tesla’s analyst call, Morgan Stanley analyst Adam Jonas shares his key thoughts, including his view that JB Straubel giving up the Chief Technical Officer role “may be the biggest news of the quarter.” It is unclear what motivated the 15-year veteran of the company to give up direct operational responsibility, but, “unfortunately, nobody asked this on the call,” Jonas said.

Elon Musk said that Q4 will be “very strong, but said the first and second quarters of 2020 will be “tough,” noted Jonas, who thinks investors should be ready for more quarter-to-quarter sales volatility heading into 2020. He keeps an Equal Weight rating and $230 price target on Tesla shares.

Model X sales slow down, Stockwinners

Needham

Needham analyst Rajvindra Gill kept his Underperform rating on Tesla after its “significant” loss reported in Q2 along with a “slight” increase in its margins hurt by average selling price reductions across all of its vehicle models. The analyst notes that while the company affirmed its FY19 delivery target and forecast profitability in Q4, he is cautious on that outlook as it would require a “significant snapback” in the second half of the year. Gill sees Tesla remaining challenged by “structurally low margins” and growing competition.

Nomura Instinet

Nomura Instinet analyst Christopher Eberle lowered his price target for Tesla to $270 from $300 following last night’s “mixed” Q2 results. Deliveries exceeded initial expectations meaningfully, but profitability metrics “underwhelmed,” Eberle tells investors in a post-earnings research titled “Spinning Its Wheels.”

The analyst doubts the quarter “will inspire enough confidence to get the stock working.” As such, he keeps a Neutral rating on Tesla.

Oppenheimer

Oppenheimer analyst Colin Rusch lowered his price target for Tesla to $356 from $437, noting that while automotive revenue and full company free cash flow beat expectations, full company revenue, gross margin and EPS results were below, driven partially by Model S/X ASP declines.

The analyst believes this dynamic will fuel bearish investors focused on limited demand for Tesla products, but believes bulls will focus on strong volumes, stable Model 3 ASP and better than expected cash flow as the company appears to be getting increasingly efficient with its spending. Rusch has an Outperform rating on the shares.

Piper Jaffray

Piper Jaffray analyst Alexander Potter reiterates an Overweight rating on Tesla following last night’s Q2 results while lowering his price target for the shares to $386 from $396.

Forward looking metrics related to revenue, such as orders and deliveries, are “all trending in the right direction – and that’s probably the most important thing,”

Potter tells investors in a research note. The post-market selloff was driven initially by mix-related concerns, and the resulting pressure on gross margin, but then Tesla’s Chief Technology Officer subsequently resigned on the earnings call, and the selling pressure intensified, explains Potter. He believes today’s pullback provides an entry point into Tesla shares.

Roth Capital

Roth Capital analyst Craig Irwin lowered his price target for Tesla to $224 form $238 after the company posted weak Q2 EPS, with automotive margins marking the lowest levels since Q1 of 2018. The analyst reiterates a Neutral rating on the shares.

Wedbush

Wedbush analyst Daniel Ives lowered his price target for Tesla to $220 from $230 to reflect a softer margin profile and pushed out profitability looking ahead. The analyst notes that the company delivered some bad news that will weigh on shares on Thursday as the company significantly missed the Street on the bottom line with “disappointing” gross margins that fundamentally call into question its ability to show sustainable profitability on the heels of lower margin Model 3 units going forward. Ives reiterates a Neutral rating on the shares.

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Ford launches new business model in Europe

Ford to cut 12,000 jobs in Europe by end of 2020

Ford to realign its European operations, Stockwinners

Ford (F) said in a statement that it is launching a new business model and fresh vehicle line-up as part of the most comprehensive redesign in the history of its business in Europe.

The company also is on track to significantly improve its financial results in Europe this year, paving the way to sustainable profitability and its longer-term goal of delivering a 6% EBIT margin.

The new European operating model and resulting organization are effective July 1.

Three new business groups – Commercial Vehicles, Passenger Vehicles and Imports – are being established to facilitate fast decision-making centered on customer needs, Ford said.

Ford Kuga will now be manufactured in China instead of Europe, Stockwinners

Ford is freshening and expanding its vehicle line-up in Europe, introducing at least three new nameplates in the next five years as it continues to grow its utility vehicle portfolio, including the all-new Mustang-inspired fully electric performance utility.

The new nameplates are in addition to all-new Kuga, Puma and Explorer Plug-In Hybrid coming by early 2020.

Manufacturing efficiency is being improved through the previously announced proposed or confirmed closure or sale of six assembly and component manufacturing plants by the end of next year: Proposed closure of Bridgend Engine Plant in South Wales; Closure of Ford Aquitaine Industries Transmission Plant in France; Closure of Naberezhnye Chelny Assembly, St. Petersburg Assembly and Elabuga Engine Plant in Russia; Sale of the Kechnec Transmission Plant in Slovakia to Magna.

This Ford Mustang designed for the European market, Stockwinners

As a result, Ford’s manufacturing footprint in Europe will be reduced to a proposed 18 facilities by the end of 2020, from 24 at the beginning of 2019.

In the U.K., the Ford of Britain and Ford Credit Europe headquarters in Warley also will close later this year and operations consolidated in Dunton.

In addition, Ford is implementing shift reductions at its assembly plants in Saarlouis, Germany, and Valencia, Spain, as well as a more streamlined management structure and marketing and sales operations.

In total, approximately 12,000 jobs will be impacted at Ford’s wholly owned facilities and consolidated joint ventures in Europe by the end of 2020, primarily through voluntary separation programs.

Around 2,000 of those are salaried positions, which are included among the 7,000 salaried positions Ford is reducing globally.

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Tesla higher after raising money

Tesla offers $650M of shares, $1.35B of notes to ‘strengthen’ balance sheet

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla higher after raising money, Stockwinners

Tesla (TSLA) confirmed in a press release that it disclosed this morning offerings of $650M of common stock and $1.35B aggregate principal amount of convertible senior notes due in 2024 in concurrent underwritten registered public offerings.

In addition, Tesla has granted the underwriters a 30-day option to purchase up to an additional 15% of each offering.

Elon Musk, Tesla’s CEO, will participate by purchasing $10M of common stock.

The aggregate gross proceeds of the offerings, assuming full exercise by the underwriters of their option to purchase additional securities, would be approximately $2.3B before discounts and expenses.

Concurrently with this offering of common stock and pursuant to a separate prospectus supplement, Tesla is offering convertible senior notes due 2024 to the public in an aggregate principal amount of $1.35B, or $1.55B if the underwriters for the concurrent convertible notes offering exercise in full their option to purchase additional notes.

Tesla intends to use the net proceeds from the offerings to “further strengthen its balance sheet, as well as for general corporate purposes.”

The notes in the offering will be convertible into cash and/or shares of Tesla’s common stock at Tesla’s election. The interest rate, conversion price and other terms of the notes are to be determined.

Goldman Sachs and Citigroup are acting as lead joint book-running managers for the offering, with BofA Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and Credit Suisse acting as additional book-running managers, and Societe Generale and Wells Fargo Securities acting as co-managers.

Wolfe Research

#Wolfe Research analyst Daniel Galves downgraded Tesla to Peer Perform from Outperform and cut his price target for the shares to $265 from $375. Tesla’s product is “truly differentiated” with a multi-year sustainable advantage in long-range electric powertrains and highly-assisted driving, Galves told investors in a research note. However, the analyst says it is now clear that “broad consumer awareness doesn’t happen overnight.”

In the interim, he believes shares of Tesla will be driven by investor confidence in the company’s medium-term demand and earnings power. And #Galves no longer has confidence in substantial free cash flow at Tesla until its Model 3 volumes rise to 7,000 per week. As such, the analyst moves to the sidelines saying he can no longer recommend the shares.

Shares of Tesla are up 4%, or $9.09, to $243.55 in Thursday’s trading following the news.

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Datawatch sold for $176 million

Altair to acquire Datawatch for $13.10 per share

Datawatch sold for $176 million, Stockwinners
Datawatch sold for $176 million, Stockwinners

Altair (ALTR) and Datawatch (DWCH) announced the signing of a definitive merger agreement under which Altair has agreed to acquire Datawatch. Under the terms of the agreement, Altair will pay $13.10 per share in cash, representing a fully diluted equity value of approximately $176M.

The transaction was unanimously approved by the boards of both companies.

Under the terms of the definitive merger agreement, Altair will commence a tender offer within ten business days to acquire all of the outstanding shares of common stock of Datawatch for $13.10 per share in cash.

This represents a 35% percent premium to the closing price of Datawatch’s common stock on November 2.

The tender offer is subject to customary closing conditions, including the tender of at least a majority of the outstanding shares of Datawatch common stock and the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Following the closing of the tender offer, a wholly-owned subsidiary of Altair will merge with and into Datawatch, with each share of Datawatch common stock that has not been tendered being converted into the right to receive the same $13.10 per share in cash offered in the tender offer.

The transaction is anticipated to close in Q4.

Datawatch Corporation designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the United States and internationally.

Altair Engineering Inc. provides enterprise-class engineering software worldwide. The company operates through two segments, Software and Client Engineering Services. Its integrated suite of multi-disciplinary computer aided engineering software optimizes design performance across various disciplines, including structures, motion, fluids, thermal management, electromagnetics, system modeling and embedded systems, as well as provides data analytics and true-to-life visualization and rendering.


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Tesla jumps on results, upgrades

Tesla rises as analysts digest first profit in two years

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

Shares of Tesla (TSLA) are on the rise after the company reported third quarter results, with a net profit of $312M, the electric-vehicle maker’s largest ever.

Tesla also said deliveries of its Model 3 grew to 56,000, adding that it “was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume.”

Following the announcement, Wolfe Research analyst Dan Galves upgraded Tesla to Outperform, while several other firms raised their targets on the stock. Nonetheless, some Wall Street analysts remain bearish on Tesla, telling investors to “not get used to [this quarter’s profitability.]”

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Tesla jumps on results, upgrades – See Stockwinners Market Radar

RESULTS

Last night, Tesla reported third quarter adjusted earnings per share of $2.90 and revenue of $6.82B, both above consensus of (19c) and $6.3B, respectively.

The company said that, “Model 3 quarterly production and deliveries should continue to increase in the fourth quarter compared to the third quarter.

Our target of delivering 100,000 Model S and X vehicles this year remains unchanged.

We expect gross margin for Model 3 to remain stable in the fourth quarter as manufacturing efficiencies and fixed cost absorption offset a slightly lower trim mix and the negative impact of tariffs from Chinese sourced components.

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Stockwinners.com,Tesla jumps on results, upgrades

For all three vehicles, additional tariffs in the fourth quarter on parts sourced from China will impact our gross profit negatively by roughly $50M […] The third quarter of 2018 was a truly historic quarter for Tesla.

Model 3 was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume.

With average weekly Model 3 production through the quarter, excluding planned shutdowns, of roughly 4,300 units per week, we achieved GAAP net income of $312M.”

WOLFE RESEARCH SAYS BUY TESLA

In a post-earnings research note, Wolfe Research’s Galves upgraded Tesla to Outperform from Peer Perform, with a $410 price target.

Saying that “Tesla became a real company,” the analyst argued that third quarter non-GAAP earnings of $2.90 and free cash flow of $881M are proof that Tesla’s earnings power is likely to outperform traditional automakers.

Management’s focus on cost and capital efficiency boosted Galves’ confidence that priorities have changed from unit growth at all cost to profitable growth and self-funding.

Further, the analyst argued that demand and margin outlook appear “very positive” and the fact that 50% of trade-ins on the Model 3 are non-luxury vehicles indicates the buyer base is likely bigger than expected.

Also bullish on the stock, Piper Jaffray analyst Alexander Potter raised his price target for Tesla to $396 from $389 as he believes the company reported a “milestone quarter,” with margins, earnings, and cash flow easily beating expectations.

While there is a still a lot of “hair” on the company, bears will struggle to poke holes in the results, Potter contended, adding that Tesla appears increasingly likely to achieve financial self-sufficiency.

The analyst reiterated an Overweight rating on Tesla shares. Oppenheimer, JMP Securities, and RBC Capital also raised their price targets on the stock.

‘DON’T GET USED TO IT’

Still bearish on Tesla shares, UBS analyst Colin Langan reiterated a Sell rating on the stock in a research note titled “Profitability at last, just don’t get used to it.”

The analyst continues to expect Model 3 average selling prices to decline into fourth quarter and 2019 as Tesla begins delivering the new $46,000 mid-range model.

Voicing a similar opinion, Needham analyst Rajvindra Gill told investors that while Tesla posted its first quarterly profit and positive free cash flow in over two years thanks to higher-margin Model 3 sales, he remains concerned over margin in the first half of 2019 given an “unfavorable mix shift of Model 3s, decline in ZEV sales, service margins stay in -35%-40% and pricing pressure on Model S/X.” Gill also questions the speed and profitability of Tesla’s production of a $45K car, “not to mention the $35K version”, in order to match its backlog of orders.

The analyst reiterated an Underperform rating on the shares.

PRICE ACTION

In Thursday’s trading, shares of Tesla have gained about 5% to $302.46.


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Musk’s tweet sends Tesla shares lower

Tesla slides after Elon Musk mocks SEC on Twitter

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Musk’s tweet sends Tesla shares lower

Shares of Tesla (TSLA) dropped in Friday’s trading after Elon Musk, the company’s CEO, mocked the Securities and Exchange Commission in a tweet, calling the agency the “Shortseller Enrichment Commission.”

Last weekend Musk reached an agreement with the SEC to settle fraud charges, and that charge is currently pending approval from a federal judge.

MUSK MOCKS SEC

On Thursday, Musk tweeted, in apparent reference to the SEC, “Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!”

Musk’s tweet came just hours after Musk and the SEC were told by U.S. District Court Judge Alison Nathan, who must approve the deal, to explain why the settlement is “fair and reasonable” by October 11, Bloomberg reported.

Separately, Musk took aim at BlackRock (BLK) and other large fund managers for fueling short sellers.

Musk alleged in a tweet that BlackRock and other firms pocket “excessive profit from short lending while pretending to charge low rates for ‘passive’ index tracking.”

SEC SETTLEMENT

This past weekend, the SEC announced that Musk agreed to settle the securities fraud charge brought against him last week.

The settlement requires that Musk will step down as Tesla’s chairman and will be ineligible to be re-elected chairman for three years.

Additionally, Tesla will appoint two new independent directors to its board and both the CEO and company will each pay $20M penalties to settle allegations that Musk misled investors in August by tweeting that he was considering taking Tesla private and had secured funding for the effort.

According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over 6% on August 7, and led to “significant market disruption.”

Additionally, the SEC is requiring that Musk get approval from the company’s lawyer before tweeting anymore company news, which reports had said could clamp down on Musk’s “headline-grabbing, unpredictable approach to promoting Tesla’s brand.”

Recode’s Teddy Schleifer reported via Twitter after the “Shortseller Enrichment Commission” tweet that the SEC agreement on Musk’s tweets “does not take effect for 90 days from the settlement date, per source. So he still has ~80 days to tweet whatever he wants.”

The SEC declined to comment on Musk’s tweet, Schleifer said.

Additionally, Fox Business Network’s Charlie Gasparino also tweeted, saying that the “@SEC_Enforcement continues to investigate @Tesla over possible misstatements on production/profitability targets-sources focus is on stated targets for Model 3/co profitability.

SEC sources say case is tougher case than @elonmusk ‘funding secured’ tweet.”

PRICE ACTION

In Friday morning trading, shares of Tesla are down 4.2% to $270.17.


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Toyota enters self-driving car services

Toyota, SoftBank agree to form JV for self-driving car services

Toyota enters self-driving car services, Stockwinners
Toyota enters self-driving car services, Stockwinners

Shares of Toyota (TM) are in focus on Thursday after the company announced plans to team up with SoftBank (SFTBF) to develop self-driving car services.

The news follows an announcement from General Motors (GM) on Wednesday that Honda (HMC) will invest $2.75B and take a 5.7% stake in its Cruise self-driving vehicle unit, in which SoftBank is also an investor.

TOYOTA, SOFTBANK TO FORM JV

Toyota announced in a statement that it and SoftBank will form a joint venture called MONET, short for mobility network, to develop businesses that will use driverless-car technology to offer new services, such as mobile convenience stores and delivery vehicles in which food is prepared en route.

MONET will provide coordination between Toyota’s Mobility Services Platform, Toyota’s information infrastructure for connected vehicles, and SoftBank’s Internet of Things Platform, which was built to create new value from the collection and analysis of data acquired from smartphones and sensor devices, the companies said.

MONET will roll out an autonomous driving service using e-Palette, Toyota’s dedicated battery electric vehicle for mobility services, by the second half of the 2020s, Toyota and SoftBank added.

The venture will have initial capital of Y2B, and SoftBank will own just over half of the business, which will initially focus on Japan and eventually go global, according to a Reuters report.

Junichi Miyakawa, chief technology officer at SoftBank who will be CEO of the new company, commented that “SoftBank alone and automakers alone can’t do everything… We want to work to help people with limited access to transportation.”

WHAT’S NOTABLE

Earlier this year, Toyota set up a new company dedicated to the research and development of self-driving vehicles, with plans to invest $2.8 billion to develop a commercially viable autonomous car.

RECENT PARTNERSHIPS IN AUTONOMOUS VEHICLES

On Wednesday, Cruise and GM announced that they partnered with Honda to work towards large-scale deployment of autonomous vehicle technology.

Honda will work jointly with Cruise and General Motors to fund and develop a purpose-built autonomous vehicle for Cruise that can serve a wide variety of use cases and be manufactured at high volume for global deployment.

Honda will contribute approximately $2B over 12 years to these initiatives, which, together with a $750M equity investment in Cruise, brings its total commitment to the project to $2.75B.

SoftBank’s Vision Fund committed $2.3B to Cruise earlier this year.

Additionally, Renault (RNSDF)-Nissan (NSANY) and Daimler (DDAIF) are considering expanding their collaboration to battery and autonomous vehicle technology as well as mobility services, Reuters reported on Wednesday, citing comments made by the CEOs of both companies.

“The industry being in transformation in the area of connectivity, autonomous cars and connected services, there are plenty of areas of cooperation for our entities,” Renault Nissan CEO Carlos Ghosn said.


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Tesla’s going private is questioned by analysts

Tesla consolidates as analysts debate if Musk should take carmaker private

Shares of Tesla (TSLA) jumped yesterday after CEO Elon Musk said he would like to see the company go private, but have since stepped into negative territory as analysts debate the idea.

 

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Tesla’s going private is questioned by analysts, Stockwinners

While Jefferies analyst Philippe Houchois believes going private “feels like the right thing to do,” his peer at Morgan Stanley questions the feasibility of Musk actually being able to achieve that goal.

TAKING TESLA PRIVATE

Yesterday, Tesla CEO Elon Musk tweeted that he is considering taking the electric carmaker private.

 

In an email to the company’s employees, the executive explained: “Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. […] As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”

Tesla gets a boost from Bud. See Stockwinners.com
Tesla’s going private is questioned by analysts

Meanwhile, members of Tesla’s board said on Wednesday that they have “met several times over the last week” and are “taking the appropriate next steps to evaluate” Musk’s desire to take the company private. Their talks with Musk, which started last week, included “discussions as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur,” the board members stated in a press release.

‘RIGHT THING TO DO’:

Commenting on the news, Jefferies’ Houchois told investors in a research note that the move “feels right” even if Musk is downplaying how supportive public markets have been. With Tesla unable to take on more debt, the analyst wonders who may fund the potential deal and end up as a new large shareholder. While the second quarter de-stressed the near-term outlook, Houchois pointed out that Tesla did not reassure about sustained demand for Model 3 at high prices and that profitability can support organic funding of investments in future products and manufacturing capacity.

He continues to think Tesla will need additional capital to fund these or risk being caught with a narrow and ageing product range within 2 years. Noting that his discounted cash flow fair value points to $300 per share, the analyst raised his price target on the stock to $360 from $250, “bridging the gap” to the $420 potential going private bid. The analyst reiterated a Hold rating on Tesla.

BUT WILL IT BE FEASIBLE?:

While Morgan Stanley analyst Adam Jonas sympathizes with Elon Musk’s argument that Tesla could be better off as a private company, he questions the feasibility of the CEO actually being able to achieve that goal.
Taking the company private would assume either that the company is on the verge of generating self-sustaining cash flows or that it can tap into a range of strategic sources of capital not previously at its disposal, said Jonas, who sees strategic value at Tesla, but thinks the “LBO math required to support [a price of] $420 is extremely aggressive.”

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

The benefits of being private are outweighed by the risks of added financial leverage, which could be even more strategically limiting, added Jonas, who reiterated an Equal Weight rating and a $291 price target on Tesla shares.
Meanwhile, his peer at JPMorgan raised his price target for Tesla to $308 from $195 to reflect the possibility of the company going private. However, analyst Ryan Brinkman told investors that he still believes that Tesla’s valuation based on fundamentals alone “is worth no more than $195” per share.
The analyst added that he is not as certain as CEO Elon Musk on Tesla going private, and assigns only a 50% probability to such a scenario, while reiterating an Underweight rating on the shares.

PRICE ACTION:

In Wednesday afternoon trading, shares of Tesla have dropped 1.6% to $373.63.


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Tesla higher on Model 3 production

Tesla jumps after Musk keeps dual role, voices optimism on Model 3 output

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Tesla jumps after Musk keeps dual role, voices optimism on Model 3 output

Shares of Tesla (TSLA) are higher as much as 4% on Wednesday morning following the company’s annual meeting in California.

At the meeting, shareholders rejected two proposals, including one that would have separated the roles of chairman and chief executive officer. Additionally, Elon Musk said the company will likely reach its goal of producing 5,000 Model 3 sedans “by the end of this month.”

SHAREHOLDERS REJECT SEPARATION OF CHAIRMAN, CEO ROLES

Tesla shareholders rejected two proposals that would have changed the company’s board, including one that would have removed CEO Elon Musk from the chairman role.

According to a CNBC report, Jiang Zhao, a shareholder who owns 12 shares of Tesla stock, brought forward the proposal to have an independent chairman, as he believes it is necessary to prevent conflicts of interest.

In May, proxy advisory firm ISS recommend that investors split the role of chairman and CEO, saying shareholders would “benefit from the strongest form of independent board oversight in the form of an independent chair.”

Shareholders also rejected a proposal to remove three Tesla board members up for re-election this year, which was brought by the CtW Investment Group.

CtW, which works with pension funds for unions, said in a letter last month that board members Antonio Gracias and Elon’s brother Kimbal Musk were too close to the CEO to ensure needed independence, while 21st Century Fox (FOX, FOXA) CEO James Murdoch lacked relevant experience.

According to Bloomberg, which viewed a copy of the letter, CtW said that “instead of recognizing the need for independent and effective board leadership, Tesla has re-nominated three directors who exemplify the company’s failure to evolve.”

‘QUITE LIKELY’ TO MEET MODEL 3 OUTPUT GOAL

At the meeting, Musk said that the carmaker’s goal of making 5,000 Model 3 vehicles per week by the end of June was “quite likely” as the car maker’s production lines were now demonstrating the ability to build 3,500 vehicles a week, Reuters reported. “This is the most excruciating hellish several months I’ve ever had… but I think we’re getting there,” Musk said.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

OTHER ANNOUNCEMENTS

Robin Ren, Tesla’s head of worldwide sales, announced at the meeting that the company intends to build its first factory outside of the U.S. in Shanghai, China, CNBC reported.

Unlike Tesla’s first U.S. factories, the company’s new “Dreadnought” factories should produce both batteries and assemble vehicles in one place.

Additionally, according to Business Insider, Musk said the company plans to reveal the Model Y next March and will likely go into production in early 2020. The report also said that the Semi will go into production in 2020 and that it will be slightly different than what was revealed in 2017 because the company has made improvements.

The Tesla Roadster will follow the same timeline for production and will have a SpaceX option package available, BI also said.

WHAT’S NOTABLE

Musk has said that Tesla plans to be profitable and cash flow positive in Q3 and Q4, tweeting in April that there is “obviously no need to raise money.”

Musk previously said that the company was not planning to raise any capital before the end of 2019. He reiterated that during the shareholder meeting and said he is still confident that Tesla will become profitable in Q3 or Q4, BI reported.

Tesla originally sought to build 5,000 Model 3 vehicles a week by the end of 2017, but later revised its target to making 5,000 Model 3 cars by the end of the second quarter.

ANALYST COMMENTARY

Citi analyst Itay Michaeli told investors this morning that while he appreciates the bull case of ramping Model 3 deliveries and Tesla achieving profitability in the second half of the year, thereby easing cash concerns and cementing the carmaker’s electric vehicle lead, he “can’t get there on risk/reward at this point.” Michaeli cut his price target for Tesla to $313 from $347 and maintained a Neutral rating on the shares.

Baird analyst Ben Kallo, who remains bullish on Tesla, said the body language at the meeting was positive, noted that shareholders approved the board of directors by a significant margin and expects management to achieve positive GAAP net income and positive cash flow in Q3 and Q4. Kallo keeps his Buy rating and $411 price target on Tesla.

PRICE ACTION

Tesla is up about 5% in early trading to $305.76.


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SoftBank to invest $2.25B in GM

SoftBank Vision Fund to invest $2.25B in GM Cruise 

 

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SoftBank Vision Fund to invest $2.25B in GM Cruise 

General Motors (GM) announced that the SoftBank Vision Fund will invest $2.25B in GM Cruise Holdings, further strengthening the company’s plans to commercialize AV technology at large scale.

GM will also invest $1.1B in GM Cruise upon closing of the transaction.

“Our Cruise and GM teams together have made tremendous progress over the last two years,” said GM Chairman and CEO Mary Barra.

“Teaming up with SoftBank adds an additional strong partner as we pursue our vision of zero crashes, zero emissions and zero congestion.”

“GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion,” said Michael Ronen, managing partner, SoftBank Investment Advisers.

“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”

The SoftBank Vision Fund investment will be made in two tranches.

At the closing of the transaction, the Vision Fund will invest the first tranche of $900M. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35B, subject to regulatory approval.

Together, this will result in the SoftBank Vision Fund owning a 19.6-percent equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.

The GM and SoftBank Vision Fund investments are expected to provide the capital necessary to reach commercialization at scale beginning in 2019.

GM (GM) Chairman and CEO Mary Barra confirmed the automaker’s plans to launch an autonomous ride-hailing vehicle in 2019.

President Dan Ammann noted that talks with SoftBank occurred over the course of several months. He said GM wasn’t looking for a partner, but found one that was “uniquely aligned” with it.

Ammann added that the Cruise team has grown to over 800 since the acquisition two years ago. He said the decision to report GM Cruise as a standalone segment is intended to enhance transparency around this part of the business.

ANALYST COMMENTS

Evercore ISI analyst George Galliers upgraded General Motors (GM) to Outperform from In Line after SoftBank’s (SFTBF) Vision Fund agreed to invest in the company’s Cruise autonomous driving unit in a deal that values the unit at $11.5B.

Galliers said he had been assigning no value to the Cruise assets before the announcement.

Under his new sum-of-the-parts valuation, Galliers applies a 6.0x multiple on GM’s core, attributes a value of about $8 per share for the Cruise assets and about 60c per share for GM’s stake in Lyft before applying a 25% discount to both of the latter. He raised his price target on GM shares to $50 from $47.


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Tariffs sink stocks

Boeing, others drop after China retaliates with 25% tariffs on U.S. products

Tariffs sink stocks. Stockwinners
Tariffs sink stocks.

Shares of companies including Boeing (BA) and Tesla (TSLA) dropped in Wednesday’s pre-market trading after China retaliated against President Donald Trump’s proposed penalties on Chinese goods with plans for 25% tariffs on American products, including airplanes, automobiles and soybeans.

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Tariffs sink stocks

BACKGROUND

On Thursday, U.S. President Donald Trump signed an executive memorandum imposing retaliatory tariffs on up to $60B in Chinese imports, according to CNBC.

The new measures are designed to penalize the country for trade practices that the White House says involve stealing American companies’ intellectual property, the report noted, adding that the tariffs will primarily target certain products in the technology sector.

Trump’s plan levies 25% tariffs on a wide range of goods — about 1,300 categories in all — and includes steel, Chinese-made solar panels, dishwashers, medical equipment and machine tools.

Shares of Alibaba (BABA), Tencent (TCEHY) and Baidu (BIDU) were under pressure following the news.

CHINESE TARIFFS

On Tuesday, China’s Ministry of Commerce announced plans to levy 25% reciprocal tariffs on critical U.S. exports, covering over 106 categories of products and impacting around $50B of Chinese imports of U.S. products.

China has targeted the largest American exports to China, airplanes and soybeans, as well as automobiles, chemicals, wheat, corn, cotton and tobacco.

People familiar with the plans tell The Wall Street Journal that many of the other goods on the list, including beef and sorghum, “intentionally affect the U.S. Farm Belt, where voters supported President Trump.”

Neither the U.S. nor Chinese tariffs will take effect immediately.

“Those who attempt to make China surrender through pressure or intimidation have never succeeded before, and will not succeed now,” Foreign Ministry spokesman Geng Shuang told reporters.

PRICE ACTION

Boeing is down 6.6%, Tesla dropped 5%, Ford (F) is down 3.4% and General Motors (GM) is down 4% in pre-market trading.


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Tesla falls after NTSB rebuke about fatal crash

UPDATED with Model 3 Production Data

Tesla falls after NTSB rebuke about fatal crash, CEO jokes about bankruptcy

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Tesla falls after NTSB rebuke about fatal crash

Shares of Tesla (TSLA) are lower after the company acknowledged that its autopilot function was involved in a fatal crash that occurred with one of its vehicles and its CEO Elon Musk tweeted on April Fool’s that “Tesla has gone completely and totally bankrupt.”

With the quarter coming to an end, Tesla is expected to report production and deliveries results within a few days.

AUTOPILOT INVOLVED IN FATAL CRASH

In a blog post late Friday, Tesla acknowledged that its autopilot function was involved in a fatal crash that occurred with one of its vehicles.

“In the moments before the collision, which occurred at 9:27 a.m. on Friday, March 23rd, Autopilot was engaged with the adaptive cruise control follow-distance set to minimum. The driver had received several visual and one audible hands-on warning earlier in the drive and the driver’s hands were not detected on the wheel for six seconds prior to the collision.

The driver had about five seconds and 150 meters of unobstructed view of the concrete divider with the crushed crash attenuator, but the vehicle logs show that no action was taken.

The reason this crash was so severe is because the crash attenuator, a highway safety barrier which is designed to reduce the impact into a concrete lane divider, had been crushed in a prior accident without being replaced.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

We have never seen this level of damage to a Model X in any other crash.

Over a year ago, our first iteration of Autopilot was found by the U.S. government to reduce crash rates by as much as 40%.

Internal data confirms that recent updates to Autopilot have improved system reliability.

In the US, there is one automotive fatality every 86 million miles across all vehicles from all manufacturers. For Tesla, there is one fatality, including known pedestrian fatalities, every 320 million miles in vehicles equipped with Autopilot hardware.

If you are driving a Tesla equipped with Autopilot hardware, you are 3.7 times less likely to be involved in a fatal accident.

Tesla Autopilot does not prevent all accidents – such a standard would be impossible – but it makes them much less likely to occur.

It unequivocally makes the world safer for the vehicle occupants, pedestrians and cyclists,” the company said.

Over the weekend, Reuters reported that the U.S. National Transportation Safety Board was “unhappy” that Tesla made public information about the crash of its Model X vehicle that killed the driver last month.

APRIL FOOL’S

After teasing on Twitter that important news was coming, Tesla CEO Elon Musk tweeted on April 1, “Tesla Goes Bankrupt Palo Alto, California, April 1, 2018 — Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it… There are many chapters of bankruptcy and, as critics so rightly pointed out, Tesla has them *all*, including Chapter 14 and a half (the worst one)…Elon was found passed out against a Tesla Model 3, surrounded by “Teslaquilla” bottles, the tracks of dried tears still visible on his cheeks.

This is not a forward-looking statement, because, obviously, what’s the point? Happy New Month!”

WHAT’S NOTABLE

In a research note to investors this morning, Jefferies analyst Philippe Houchois upgraded Tesla to Hold from Underperform with an unchanged price target of $250.

The analyst noted that Tesla shares are down 32% from their September 2017 peak and that he sees a “high probability” that management and the board, when releasing first quarter unit data this week, take “more drastic action” on guidance and funding to “restore credibility.”

At the current stock price, either would be positive, Houchois contended.

The analyst believes “higher than consensus” dilution from a capital raise could be positive for the shares, if it “credibly de-risked” the Model 3 production ramp up.

Stockwinners believes this is a good place to open a position in Tesla.

MODEL 3  PRODUCTION DATA

In an email to employees today, Tesla CEO Elon Musk said the Model 3 passed a production rate of 2,000 per week in Q1, Ryan Felton of Jalopnik reports.

In January, Tesla projected it would make 2,500 Model 3s per week by the end of the quarter, Felton points out.

It has been “extremely difficult” to pass the 2,000 vehicle per week rate for the Model 3, “but we are finally here,” Musk wrote in the email obtained by Felton.

PRICE ACTION

In Monday morning’s trading, shares of Tesla have dropped 7% to $247.39.


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Tesla Model 3 named Popular Mechanics’ Car of the Year

Tesla Model 3 named Popular Mechanics’ Car of the Year

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

Popular Mechanics has named Tesla’s Model 3 as its Car of the Year.

Automotive editor Ezra Dyer said, “The demand makes sense. I try to reserve judgment on any car until I drive it, but the Model 3 sure looks good on paper.

Tesla (TSLA) claims zero-to-60 miles in the five-second range-unofficially, the first owners  are getting into the fours…

The autonomy is reliable and pleasantly novel, but I learn that it’s more fun to do the driving myself, sandbagging in the middle lane and then mashing the throttle to revel in that gush of acceleration.

With 271 horsepower, the Model 3 doesn’t quite rearrange your internal organs like a Model S, but it’s still ferocious… It’s thrilling, but the Model 3 isn’t perfect. I’d like a heads-up display, some way to put the speedometer in my line of sight.

And there are some places where you can see the cost-cutting, like in the rear trunk, where there’s no trim panel up top, just bare metal and cutouts for the speakers that would be there if you had ordered the premium sound system. But I think I could live with such compromises.

In fact, I know I can, because when I get home, I do something that I’ve never done with any of the other thousands of cars I’ve tested: I put down a deposit.”

TSLA closed at $257.78


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Tesla in focus ahead of shareholder vote on CEO compensation

Tesla in focus ahead of shareholder vote on compensation

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Tesla in focus ahead of shareholder vote on compensation

Shares of Tesla (TSLA) are in focus amid the upcoming shareholder vote on a proposed $2.6B compensation package for chief executive officer Elon Musk.

SHAREHOLDER VOTE

Tesla shareholders will vote on the package for Musk at a special shareholder meeting on Wednesday, Bloomberg reported.

The package, which would give Musk an unprecedented ten-figure award of stock options, is linked to Tesla meeting a number of goals and needs support from investors holding a majority of the share.

Shareholders Baillie Gifford & Co. and T. Rowe Price (TROW) have signaled they’re likely to support the plan.

PAY PLAN DETAILS

On January 23, Tesla announced a new ten-year performance award for Musk with vesting entirely contingent on achieving market cap and operational milestones.

In order to fully vest, Tesla’s market cap would have to grow to $650B, an increase of almost $600B, and important revenue and profitability goals would also have to be achieved.

Musk will receive no guaranteed compensation of any kind — no salary, no cash bonuses and no equity that vests simply by the passage of time. Instead, his only compensation will be a 100% at-risk performance award. The performance award consists of a ten-year grant of stock options that vests in 12 tranches.

Each of the 12 tranches vest only if a pair of milestones is met. To meet the first market cap milestone, Tesla’s current market cap must increase to $100B.

For each of the remaining 11 milestones, Tesla’s market cap must continue to increase in additional $50B increments.

For Musk to fully vest in the award, Tesla’s market cap must increase to $650B.

To meet the operational milestones, Tesla must meet a set of escalating revenue and adjusted EBITDA targets designed to ensure that as Tesla’s market cap grows, the company is also executing well on both a top-line and bottom-line basis.

For each of the 12 tranches that is achieved, Musk will vest in stock options that correspond to 1% of Tesla’s current total outstanding shares. If none of the 12 tranches is achieved, Musk will not receive compensation.

For vesting to occur when the milestones are met, Musk must remain as Tesla’s CEO or serve as both executive chairman and chief product officer with all leadership reporting to him.

PROXY FIRM RECOMMENDATIONS

Proxy advisory firm Glass Lewis has recommended Tesla stakeholders vote against the proposal, saying if Musk were to receive the full grant, he would own 28.3% of the car maker, Reuters reported in March.

“The cost of the grant is staggering relative to executive compensation levels among public companies worldwide,” Glass Lewis said. In addition, proxy firm ISS recommended shareholders reject the pay package, saying the “unprecedented” stock award is too rich, Reuters reported.

The award “locks in unprecedented high pay opportunities for the next decade, and seemingly limits the board’s ability to meaningfully adjust future pay levels in the event of unforeseen events or changes in either performance or strategic focus,” ISS said.

TESLA UNDER PRESSURE

Tesla has also seen executives depart the company in the last month with Susan Repo, corporate treasurer and VP of finance, leaving to take on a chief financial officer position at another firm and chief accounting officer Eric Branderiz departing for “personal reasons”.

Additionally, the company lost Jon McNeill, president of global sales and service, in February and former CFO Jason Wheeler in 2017. Tesla is also expected to report production and deliveries results for its Model 3 Sedan, which has faced challenges including quality issues and a production halt. Musk has delayed manufacturing goals several times for Model 3.

PRICE ACTION

Tesla rose 2.6% to $318.54 in Wednesday’s trading.


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Tesla drops as executives leave

Tesla drops as second executive departs in less than a week

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Tesla drops as executives leave

Shares of Tesla (TSLA) dropped in Wednesday trading following a report that said a top financial executive is leaving the company, the second executive departure in less than a week at the electric car maker.

LATEST EXECUTIVE DEPARTURE

Susan Repo, Tesla’s corporate treasurer and VP of finance who joined the company in 2013, has departed the company to take on a CFO position at another firm, Bloomberg reported last night, citing a person familiar with the matter.

Repo’s departure comes less than a week after Tesla Chief Accounting Officer Eric Branderiz left the company for “personal reasons,” Tesla disclosed on March 7.

The departures of Repo and Branderiz are the latest in a string of executive departures at Tesla over the last 12 months.

In addition to Repo and Branderiz, Tesla has also lost Jon McNeill, president of global sales and service, who left the company in February to become Lyft’s COO.

The company also lost former CFO Jason Wheeler in 2017. Other departures include Chris Lattner, who left after leading Tesla’s Autopilot engineering team for less than six months, Lyndon and Peter Rive, Kurt Kelty and and Diarmuid O’Connell.

Model 3 Tesla

TESLA UNDER PRESSURE

Tesla is expected to report production and deliveries results for its Model 3 Sedan, which has faced challenges including quality issues and a production halt.

Elon Musk, the company’s CEO, has delayed manufacturing goals several times for Model 3. Reuters said last week that Tesla had to temporarily suspend Model 3 factory lines in February to “improve automation” and “increase production rates.”

Additionally, Green Car Reports said on March 9 that the quality of the 2018 Tesla Model 3 is “terrible,” and that the build quality was “the worst we have seen on any new car from any maker over the last 10 years.”

WHAT’S NOTABLE

Tesla shareholders are expected to vote whether to approve CEO Musk’s $2.6B pay package, which the board recommends and proxy firms ISS and Glass Lewis do not, at a meeting of shareholders on March 21.

Musk has said that he will not accept the package unless the company reaches a market cap of $650B.

VOLKSWAGEN CHALLENGE

Tesla is also facing challenges from other automakers in the electric car space, including Volkswagen (VLKAY), which said it will equip 16 factories to produce electric vehicles by the end of 2022, compared with three currently.

As of next year, the group plans to roll out a new battery-powered model “virtually every month,” CEO Mathias Mueller said.

“When the technology and the price are right, customers are ready to change over. With the I.D. family, we will take the lead in the electric movement,” Volkswagen executive Herbert Diess said yesterday.

PRICE ACTION

Tesla dropped 2.2% to $334.42 in Wednesday’s trading.


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