Tuesday, August 7, 2018

Tesla: $420's Way Too Cheap

If you read our Tesla (NASDAQ:TSLA) report on Thursday you'd agree that Elon Musk's $420 bid is way too low.

He knows it's way too low that's why he blames the short sellers to take his business private so suddenly. It's really that the business is way too cheap.

If you back into the S&X gross margins you get 37% for Q2. When you start to do the math for 2019 EPS you can see the Street's too low by maybe $16/share. The secret sauce to the earnings model is the gross margins. They are ramping too fast. They are blowing other auto companies away.

No wonder he suddenly wants to take this private. We have a $900-1000 target on it based on what the company said about gross margin targets for Q3, Q4 and 2019.

Bears Way Too Bearish  

Too bad there were so so many bears and shorts. All that crazy negative media. First the CEO buys stock himself, now he says nope I'll take the whole thing private.

How wrong were all those negative reports? It's nuts.

As soon as they said they were targeting a profit in Q3 we said, "No idea how the shorts stay short." That was in early June. We took heat for that comment.

If you want to see the model feel free to subscribe and you'll see you don't have much problem getting to $18-20 for 2019 based on everything they said over the last two quarters. The Street's at about $3.00.

Proof is in the pudding. That's why he's trying to take this thing suddenly on the cheap.

But what about the shorts?

The shorts may not let this stock stay below $420 and may not let it stay down to $420. How do they get out? This could be a wreck higher.

Conclusion

$420's way too low.

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