When Tesla reports its second-quarter delivery numbers this week, investors will be looking to see if Elon Musk was able to recover from those dismal Q1 numbers, when the company delivered just 63,000 vehicles to customers. Musk told employees last week that they needed to "go all out" in order to hit the 90,000 to 100,000 delivery benchmark that Musk has forecast.
But for Tesla ($TSLA) shorts like Gabe Hoffman, whether or not Tesla hits its guidance obscures the larger structural problems with the company.
"The truth is, it doesn't really matter" how many cars Tesla delivered last quarter, Hoffman told Cheddar, because the carmaker had to slash prices to goose demand as the federal tax credit for electric cars goes away (it dropped to $1,875 as of Monday).
"People have been looking to this number as the last piece of news that's not horrible," Hoffman said. He is general partner at the hedge fund Accipiter Capital Management, which has had Tesla as its largest short position all year. That position has paid off ー the stock has lost about a third of its value in the first half of 2019 even when factoring in a 20 percent climb in June.
Tesla shorts like Hoffman believe the stock is fundamentally flawed as Musk faces down the barrel of increasing competition from legacy luxury automakers like Audi and BMW, which benefit from scale and supply chain strengths that Tesla, as a relatively young company, has not yet mastered.
"Any company that sits under a mountain of debt ー any company that loses billions and billions of dollars a year ー I simply don't see any future for the stock long term," Hoffman said. "I do believe it will be very nearly worthless."
The fundamental problem is demand, according to Hoffman. Domestic demand "isn't there" and Musk's bet that he can make up for it in China ー Tesla is working furiously to complete a Shanghai Gigafactory ー is misguided, he said.
Adding to that, the company is grappling with quality issues like paint fading, a revolving door of high-level executive departures, and a sense among some Tesla owners that the service arm is understaffed, With that at the forefront, Hoffman predicts Tesla shares are likely to continue to struggle in the back half of the year, even if Q2 deliveries hit their mark.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
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Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
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