Elon Musk is gloating.
“Stormy weather in Shortville…” the chief executive officer of Tesla tweeted Monday, as the company’s stock price reached a record high and topped Ford Motor in market value.
Musk was poking at short sellers, who make money when stock prices go down — but lose big when their bets are wrong.
For them, the weather is stormy indeed. “Yeah, I had to take some off the table today,” said Mark Spiegel of Stanphyl Capital Management. That means he sold some of Tesla’s high flying stock at a loss.
But short sellers still hold a large Tesla position, and Spiegel is sticking with his bet. As for Musk’s tweet, the investor said, “There’s something called karma. I’m looking forward to it. I can tell you, time is not on Tesla’s side.”
Maybe. But right now, Tesla bulls are on a thunderous run. The stock closed Monday at $298.52, up up $20.22, or 7% for the day and up 64% since Dec. 1, 2016.
That put Tesla’s market value at $48.63 billion, rushing past Ford Motor’s $45.47 billion, even though Ford pulls in 22 times Tesla’s revenue and earned profits of $4.6 billion in 2016 compared with Tesla’s $667-million loss.
Tesla is now the sixth-most valuable automaker; Toyota ranks first with a market value of $160 billion.
The stock surge followed Tesla’s announcement that it produced 25,418 electric cars in this year’s first quarter — putting it on a plateau of sorts, since Tesla made about the same number of cars in the last two quarters of 2016.
The flat production levels and the big pop in Tesla stock have analysts scratching their heads, even those who see a bright future for the company.
“The fact that Tesla stock is valued higher than a company like Ford shows just how inflated their value is,” said Efraim Levy of CFRA Research, who has a "sell” recommendation on the stock. Although Musk has become a business superhero and a household name, he said, “the stock price can’t be justified by any traditional valuation.”
The stock surge reflects tremendous enthusiasm for Musk and for the upcoming Model 3, a mid-market electric sedan with a base price of about $35,000 before government incentives. The losses are attributed to investments necessary to achieve ambitious growth.
Rumors that Musk will soon put the spotlight on an upcoming Model Y, a crossover/hatchback version of the Model 3, may also have contributed to stock’s sharp rise.
Without enough cash flow to aggressively fund future growth, Tesla is reliant on regular infusions of outside capital. So far, no problem. In March, it issued new stock and convertible debt to raise $1.25 billion. A few days later, China Internet giant Tencent revealed it had bought 5% of Tesla.
In a Sunday announcement about auto production and deliveries, Tesla boasted that its shipments to customers were 69% higher than the first quarter last year, and that “a new quarterly record” was set — topping third-quarter 2016 shipments by 179 cars.
Why production at its Fremont, Calif., assembly plant has been flat for three quarters straight, the company has not yet clarified.
Late last year, Tesla struggled to meet planned production levels. At the time, it said a shift to a new, more sophisticated sensor system for its Autopilot driver-assist technology put a crimp in production.
That slowdown followed a falling out with former sensor supplier Mobileye, which no longer sells its vision systems to Tesla. (Mobileye recently was bought by chipmaker Intel.)
But why no production growth in the first quarter?
“Something is going on,” said Levy. “If production is not moving up, the question is, why not?”
The answer, said another analyst, may lie in Tesla’s next act.
“I suspect they are focusing much of their effort on preparing for the Model 3,” said Michelle Krebs, senior analyst at Autotrader. Tesla will build the Model 3 in the same plant that makes the Model S sedan and the Model X sport utility vehicle.
Short-seller Spiegel thinks the market for the Models S and X are near saturation.
“The market can only support so many $100,000 cars that you have to plug in,” he insists.
Musk intends to prove the naysayers wrong with a dramatic boost in production.
Plans are for initial Model 3 production in July, accompanied by a rapid increase in factory throughput, from about 2,000 cars a week now to 5,000 a week by the end of this year and 10,000 a week sometime in 2018, according to the company.
Tesla is more than a car company. It also makes storage batteries for homes and businesses, and late last year bought SolarCity, a solar energy installer. But analysts are near unanimous in saying prospects for Tesla stock for the next couple years depend on a successful rollout of the Model 3.