Institutional investors don’t like the stock because it’s a 16 year old company that’s never made a profit a year in existence. It’s pretty easy to see how that could make any money manager run scared
And you only get to play the startup card so long. Tesla is indeed a 16 year old company whose production struggles look even more troubling considering their growth isn't what anyone would really consider hockey stick, and their competitors have none of their scaling issues.
Add in a leader that has shown some stability issues, and its tough to make a case for it.
Personally, I root hard for Tesla the company, want to see them succeed, and after recently buying a house with a parking spot, may buy a Tesla as my next car, but I am not buying shares anytime soon.
The problems with customer service and production quality are to be expected if you scale at the speed that they currently do.
All the while, they are still losing money. This is not just about cash flow, this is about actual earnings. You have to look into where the disconnect there is as well to make a bull case.
Their other issues are a combination of scale and fundamental business issues with selling cars. Other manufacturers have profitable dealer networks selling their cars. Tesla has a money losing sales and service network. Some of this is due to their relatively small scale, but some of the problems are deeper than that, unfortunately.
I would argue that slow down is mainly due to the nature of the production ramp, which goes exponential in the beginning but is now starting to flatten out. As it flattens though margins should continue to get better. If they get additional factories like the one in China it should reinvigorate the growth rate.
For me the bull story goes something like: they sunk a lot of money building out their very first mass producing production line, making a lot of mistakes on the way. Although they have some quality and service and margin issues people still keep buying their cars, which is the most important. Fixing the margin and other secondary issues is just a matter of time and continuous optimization.
So the most important of Musks hypotheses that people like buying electric cars if they are better in every important category is pretty much proven by now.
The second, that they are able to produce them at a profit is still to be proven, but economies of scale play a big role in that and they are first beginning to really leverage those.
Edit: Wow, so much hate for a one-line comment. I have five replies and three downvotes as of now.
I stand by my comment. I think Tesla is building long-term value (brand recognition, a reputation for innovation in an stodgy industry, technical know-how in multiple industries) that will allow them to be profitable. I know well how Amazon got here, but I don't care about the technicalities. It is the behemoth that it is because of the compounded value added over 14+ years. I see Tesla equally driven and able to take advantage of the things it puts in place now.
Amazon can be forgiven for losing $1.6 Billion in the 2001 recession, but their pathway to profitability was rather short all else considered.
Amazon has famously low margins, but those low margins commanded a mighty profit for decades. They are not the company you want to compare against Tesla. Tesla's strategy is supposed to be luxury vehicles at high margins and relatively (relative to Ford / Toyota / its other competitors) low production.
In contrast: Amazon is low margins while out-producing its competition. A very, very bad comparison.
2003: $35 Million profit
2004: $588 Million profit
2005: $359 Million
2006: $190 Million
2007: $476 Million
2008: $645 Million
2009: $902 Million
2010: $1,152 Million
2011: $631 Million
2012: $(39) Million <--- First loss
2013: $274 Million
2014: $(241) Million <--- 2nd loss
2015: $596 Million
2016: $2,371 Million
2017: $3,033 Million
2018: $10,073 Million
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Aside from 2012 and 2014, Amazon was both profitable AND cash flow positive. Amazon was Cash flow positive all 15 years in this time period as well. But I'm talking net profit / net loss here.
IMO: there's no valid comparison to Tesla here. Amazon is not the company you want to compare against Tesla's performance.
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Anyway, yes, Jeff Bezos sacrificing one year or two years of profits (over 15 years) for greater long-term growth could make sense. That doesn't actually mean its healthy for Tesla to consistently lose money for 10 years straight.
That's longer than average, but it's also a lot shorter than 16 years.
Tesla is likely coming to the end of the period where they have a relatively unique portfolio of products. We're starting to see the traditional car makers come up with competitive vehicles.
Whilst Tesla may ride this out fine, it's likely to have an impact on things like margins, going forward.
closest competitor for the Model X at the moment appears to be the Jaguar I-Pace.
For the model three there's things like the Hyundai Kona and Renault Zoe which are becoming competitive.
I don't think it's there yet, but if I was an investor looking at a 2-3 year timeline, you've got to expect increased competition as there's various models coming along from various companies. Not all of them will be successful, but it's a fair likeliness that some will be.
Amazon chooses to make little/no profit as a long-term business strategy to reinvest everything.
Tesla is forced to make little/no-profit as a short-term business obligation to their suppliers.
Tesla is in a completely different situation. Cars require massive upfront investment before their revenue is realized, and given the results just posted, Tesla will most likely post a quarter with declining revenue.
People should stop comparing things to Amazon. Amazon was successful because it was unique.