Institutional investors are invited to join our analyst Jay Van Sciver for a detailed look at his Tesla short thesis today at 2:00pm ET. Email sales@hedgeye.com for access.
Overview
We see Tesla longs mistakenly celebrating the reported 3Q18 profit, with likely unsustainable results generated in part by depleting high-end demand.
Our short thesis looks increasingly robust, with the share price rebound providing another opportunity just seven weeks from the U.S. tax credit stepdown.
Interest in the Tesla brand is fading on the metrics we track. Regulatory investigations and concerns about quality are very negative for demand, while falling used car prices, declines in subsidies, and reported service challenges increase ownership costs.
We’ll look at our new and updated data sets, including the first run of our Model 3 test drive utilization tracker.
We continue to see significant downside in shares of Tesla, with key catalysts in 1H19.
Highlights
- Test Drive Utilization Data: Model 3, S, and X measures show weakening interest and distinct sensitivities
- Used Vehicle Pricing, Inventory: Headwind to trade-in values, lease residuals, and total ownership cost
- November Survey Results: Ongoing brand deterioration, with some surprising trends in responses
- Mid-Term Impact On Tax Credit Extension: Lame duck session; low odds of movement or near-term ‘horse trading’
- Review Of Magical 3Q18: Accounting a meaningful factor, but mix likely a key past support and future impediment
- Trajectory, Catalysts: Competing platforms, pre-buy, credit expiration, soft subsidy restrictions, and challenging reflexive elements to the model
- Strategy, Valuation: We see Tesla as a potential zero in a more competitive, less subsidized environment, and we continue to pursue a short-the-squeezes strategy
