Our Industrials analyst Jay Van Sciver is hosting a call reviewing our short theses on Uber (UBER) and Tesla (TSLA) this Friday at 12:30PM EDT. If you are an institutional investor interested in accessing this call or related research please email firstname.lastname@example.org.
Tesla and Uber couldn’t generate profits at the peak of the cycle, so an adverse environment is likely to prove even less helpful.
We’ll review our current data collection, estimates, and scenarios for both companies in the call. We’ll also consider trajectories for recoveries and the evolving long-term structural changes to both markets.
While we are less bearish on the Industrials sector relative to the broader market, TSLA remains a notable vulnerable outlier. With no US federal tax credits, substantial decline in activity and support in China, and serious headwinds in Europe, 1H results at Tesla are likely to be surprisingly weak.
Cash burn and equity declines at both companies risk long-term, high risk investment spending that undermines the growth expectations for key holders. Both companies are likely to remain in the ‘underperformance via dilution’ basket as both have implicit dependence on equity markets to fund operating losses.
Neither had demonstrated an ability to expand beyond existing markets, as we see it. Uber is dependent on a narrow set of cities and ride-types in its ridesharing business, a structural vulnerability underappreciated by investors in the context of the company’s TAM and growth view.