Does the Axios Interview Increase the Likelihood of a Blow-Off Squeeze in Tesla Inc (NASDAQ:TSLA)?
Tesla Inc (NASDAQ:TSLA) has an interesting catalyst now in play. On Sunday, on the HBO Axios interview show, the company’s CEO, Elon Musk, stated that the company was within “single-digit weeks of death” earlier this year because of problems with the Model 3 production process.
“Essentially the company was bleeding money like crazy,” Musk said in the Axios interview. “And just if we didn’t solve these problems in a very short period time, we would die. And it was extremely difficult to solve them.”
Tesla Inc (NASDAQ:TSLA), at the same time, is coming off an unequivocally “surprising” Q3 win. The stock has been crushing the broad market in terms of technical relative strength. And the Street has flipped to full bull in terms of sell-side sentiment.
That confronts the other pressing issue that defines this stock: very large and committed bears. That phrase used to refer to Andrew Left, David Einhorn, and Jim Chanos. However, in October, Left switched sides. There are others on the big bear list.
But Einhorn and Chanos serve the archetypal role well here for our purposes.
What we wonder is this: is it just possible that the narrative of “a company that was close to death but miraculously found the magic formula and has now solved its production problems with the Model 3” is even more of a problem for the bear thesis than the narrative of “a company that some people mistakenly thought was struggling but actually was fine all along”?
We put out an article last month positing that the bears on TSLA were so hyper-visible that they could find themselves subject to a sort of Ackman-versus-Icahn-in-HLF risk, where a spectacular and career-injuring blow-off squeeze might get traction as the blood got in the water.
After all, the knowledge that there are big committed shorts is often a motivation to buy a stock that starts to outperform the market, particularly if there is some symbolic moment that defines a sense of a narrative inflection.
And we would wonder now if that moment might be captured by Mr. Musk’s “confession” on Sunday night that the company has been to the brink, faced death, and found its holy answer on the Model 3.
Top Down View
Tesla Inc (NASDAQ:TSLA) frames itself as a company that designs, develops, manufactures, and sells electric vehicles, and energy generation and storage systems in the United States, China, Norway, and internationally.
The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers sedans and sport utility vehicles.
It also provides electric vehicle powertrain components and systems to other manufacturers; and services for electric vehicles through its company-owned service centers, Service Plus locations, and Tesla mobile technicians. This segment sells its products through a network of company-owned stores and galleries.
The Energy Generation and Storage segment offers energy storage products, such as rechargeable lithium-ion battery systems for use in homes, commercial facilities, and utility grids; designs, manufactures, installs, maintains, leases, and sells solar energy systems to residential and commercial customers; and sell renewable energy to residential and commercial customers.
The company was formerly known as Tesla Motors, Inc. and changed its name to Tesla, Inc. in February 2017. Tesla, Inc. was founded in 2003 and is headquartered in Palo Alto, California.
Tesla Inc (NASDAQ:TSLA) generated sales of $6.8B, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 70.5% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($3.1B against $9.8B, respectively).