Tesla (TSLA) is rebuilding its reputation as a difficult stock to short after its annual meeting on Tuesday evening.
Shares notched a solid 4% gain in pre-market hours, before declining in Wednesday morning trading. As many will recall, the Elon Musk-led company was among the worst performers in the market for the month of May, falling about 30% from May 3 to its June 3 bottom.
One of the main issues confronting the company amidst the slide was its demand problem, a possible issue exacerbated by price cuts to existing models that seemed to cement the suspicion.
"I want to be clear that there is not a demand problem... absolutely not," Musk told investors, seeking to pacify the lingering concern. "Sales have far exceeded production, and production has been pretty good. We have a decent shot at a record quarter."
He added that Model Y demand will likely buoy figures for Tesla autos into 2020 production, even if its Model 3 and S models become less popular in the longer run, and that the company is selling essentially every car it can produce.
The bullishness on global demand is aided by analysts optimistic on Chinese demand, a key target region for Musk following the unveiling of a Gigafactory in Shanghai.
"While we believe rising battery costs are likely to be a 2019 margin headwind, demand from China will likely be stronger than most anticipate, reducing the potential for lowered 2019 unit guidance," Roth Capital analyst Craig Irwin said on Monday. "China Model 3 deliveries of 2,324 units in May, after the initial 259 deliveries in April, suggest a credible [second half of 2019] ramp."
He added that the longer range of vehicles compared to offerings from Audi (AUDVF) and Volkswagen (VLKAF) should allow it to retain its strong position in electric vehicles globally and gain market share in the key Chinese market, if it can avoid the wrath of the trade war with the domestic factory.
Musk also pointing out the Model 3's energy efficiency. "I don't want to pick on the E-Tron but it's... [laughs]... there's room for improvement," he jokes. Crowd, made up of shareholders, obviously eating it up. pic.twitter.com/BnVQbDVetc
— Sean O'Kane (@sokane1) June 11, 2019
More humorously, the presentation also showed that Tesla's demand is far outpacing the "Honda Corolla," a non-existent car that is likely meant to reflect Toyota (TM) Corolla sales instead.
Yet, many analysts that had long been bullish on the stock are expressing increasing skepticism.
"We continue to believe in the near term Musk and Tesla are facing a 'fork in the road scenario' with Model 3 demand, which we note Musk commented there was not a demand issue, sales are exceeding production, and ~90% are coming from non-reservation holders (new customers)," Wedbush analyst Dan Ives wrote on Tuesday evening. "In our opinion, Tesla needs a significant rebound in Model 3 deliveries this quarter as well as into the back half of 2019 for the company to provide sustained profitability, which remains a hot button issue of the Street, in light of the softness seen in the March quarter and the recent capital raise."
Musk may have convinced many that this is achievable, but the burgeoning community of bears eyeing the stock remain unmoved, as many say Musk will need to prove his ability to achieve his ambitions after falling short one too many times.
One of the glaring criticisms concerns the robo-taxis narrative that was charted to take the company to a $500 billion valuation by Musk earlier this year and was seen as a key aspect of the $2.7 billion capital raise that closed in early May. The narrative was significantly dampened in the shareholder meeting and pushed off after headlining bullish takes earlier in the year.
"Elon already started backtracking on the whole 2020 robo-taxi thing," Gabe Hoffman, general partner at Accipiter Capital, said. "Remember, when Tesla raised cash Elon was claiming that would be the main value driver which would propel Tesla to be a half trillion dollar value company?" He noted that this is indicative of the shifting narratives that Musk employs to distract from existential problems that persist in the financial and litigative spheres.
Musk backtracked by explaining that while the company is projecting the capability of cars to engage in full self driving by the close of 2020, the project will still need regulatory approval. That is not something that moves quickly and could be years off still, if Musk's predictions can be taken seriously.
"We could practice a rideshare fleet with people and then that would be good for figuring out things for the robo-taxi fleet in the future," he more modestly proposed. "So that might make sense. Sort of a supervised robot taxi."
The statements appear much more watered down than prior calls for a full fleet hitting roads next year. Additionally, the insurance business that was recently touted for roll out in the near term remains murky.
The tempered statements and more-uncertain forecasts following such optimism earlier in the year has cast increased doubt on all of Musk's statements, demand projections included.
As has been stated often before, the uncertainty is likely to keep the stock in the battleground category. For the time being, the bulls appear to be retaking ground.
