Tesla might need to raise money for its energy storage products, believe analysts, if the company continues posting operating losses. In an investor note on Thursday, Adam Jonas, an analyst with Morgan Stanley, called Tesla’s cash burn “eye watering.”
Tesla may need more cash
Jonas noted that it is likely Tesla’s cash balance gets exhausted about three quarters from now. “In any case, we believe Tesla may find a capital intervention desirable if not absolutely necessary,” Jonas noted. Analysts at JPMorgan. and CLSA also noted that the company may need to raise money. The Model S maker stated that it had $1.51 billion in cash and cash equivalents as of March 31, a drop from $1.91 billion three months earlier, says a report from Bloomberg.
Apollo Global is no longer the “king of distress”: Josh Harris
Historically, Apollo Global has been known as the king of distressed investments for its track record of taking distressed assets and turning a profit on them. However, the pandemic has changed the firm's approach to the markets, at least temporarily. Q2 2020 hedge fund letters, conferences and more At CNBC's Institutional Investor Delivering Alpha Conference, Read More
JP Morgan analysts noted that the first quarter free cash flow, which is operating cash flow excluding capital expenditure, was -$558 million, a “disquietingly large” figure. The analysts added that the intensity of free cash burn indicate that investors will get the value if the company goes for additional capital.
However, Andrea James, an analyst with Dougherty & Co., believes the concern about cash burn “misses the mark.”
Where did the cash go?
Tesla executives noted that first quarter spending rose on account of development of the Model X sport utility vehicle and investment in tooling, a new paint shop, the gigafactory for battery production in Nevada, and the sales and service network. The EV manufacturer noted that they also spent several million dollars on expedited shipping because of the West Coast port strike.
Tesla Chief Financial Officer Deepak Ahuja said the company is expected to be cash flow positive by the fourth quarter. Ahuja said that with more finished goods inventory, it makes sense to establish credit-backed or raw material. The executive, while speaking on Wednesday’s conference call, added that the company will take such actions to ensure a solid balance sheet
Tesla posted a loss of 36 cents per share in the first quarter, which was better than the 49 cents loss estimated by analysts. On Thursday, Tesla stock closed up by 2.76%, and year to date, the stock is up by almost 7%.