The car company for the Facebook generation: Tesla sells luxury EVs and integrates software (and non-trivial amounts of hardware) to run customers’ homes (and in the case of Solar City, their utilities). Launched by PayPal’s founder Elon Musk, TSLA sells directly to consumers without franchised dealerships. The most recent earnings report, like previous ones, showed a profit--even though Tesla reported an operating loss, the company finally became cash flow positive for the first time in recent history. While not traditional indicators, the share price of TSLA tells its own story. More than 6 years ago (i.e. ‘the old days’), a share of TSLA was trading for $17.
Product Delivery. The initial cars (the Roadster and Model S) were highly priced and driven by (small amounts of) mindshare. The Model X and Model 3 saw the company begin to deliver meaningful volumes. However, with the upcoming launch of the $35K model 3, Tesla is making a very meaningful commitment to global vehicle sales by cutting out the middlemen (and the inefficiencies that come with it). Tesla management has never even implied that they would consider franchising out its business.
Growth Engine. Production numbers are impressive but are just the latest phase in the company’s multi-faceted growth plan. Tesla is continuing to close its physical retail stores as well as the traditional leasing program (in favor of selling its vehicles outright) and the company is aiming to do the same in energy with its home battery storage solution (Powerwall).
Leadership & Growth Mindset. Elon Musk, CEO and founder of Tesla, is a modern day superhero. His vision in taking a company that was on the brink of failure in 2006 and turning it into one that is putting not just EVs but all vehicles (including Mercedes Benz and Ferrari) on notice is nothing short of revolutionary. Sure, he comes with his fair share of criticisms (shorting the stock and calling it out on twitter). However, the company has spent $4.8B in capital over the last 12 months--more than the next three closest capital intensive consumer-tech companies (Apple, Amazon, and Netflix) combined. Elon Musk has never been afraid to take risks (although whether they are strategic risks or blind gambles is debatable) and has never shied away from a microphone (be it wired or wireless). With the mission of changing the way that transportation works and a willingness to take risks (as has been witnessed), one should not be surprised that he has come under heavy criticism from traditional automakers and environmentalists. He will continue to fight battles as the company grows and diversifies.
Profitability. After Tesla reported its first profitable quarter in a long time, the company turned heads as it again reported profits (albeit tiny ones) two quarters later--that was until Elon Musk announced a massive 3rd Quarter loss (due to lower S/X & S/3 deliveries versus planned and a huge writedown due to currency concerns). The company has enough positive earnings momentum to withstand such an event and has raised capital several times to cover its cash burn. Over time, with gross margins and FCF expanding, Tesla should be able to weather such events.