The Sell-Off Resumes...
A really bad day for Tesla... Has Musk's luck finally run out?... More of the same from the Fed... The sell-off resumes... 'The final investment you need to make in this bull market'...
It was not a good day for electric-car maker Tesla (TSLA)...
Shares of our favorite whipping boy plunged as much as 8% following its latest quarterly "earnings" announcement last night.
While the company did report better-than-expected revenue of $3.41 billion for the quarter – compared with estimates of $3.22 billion – there was little else to celebrate. As the Wall Street Journal reported...
Tesla burned through cash at a greater rate than analysts expected during the first quarter, intensifying pressure on the Silicon Valley auto maker to raise more capital if it continues to struggle ramping up production of the Model 3 sedan.
The company's free cash flow widened to about a negative $1 billion after burning $277 million in the final three months of last year, a figure that was unusually low thanks, in part, to delays in spending and customer deposits...
Tesla posted a loss attributable to common shareholders of $710 million, its fifth consecutive quarter of record losses. Tesla's per-share loss of $3.35 was narrower than analysts' average expectations, according to FactSet, but those projections were lowered significantly in recent months.
In short, despite repeated promises to the contrary, the company is still falling laughably short of its production targets. Meanwhile, it continues to hemorrhage money at a mind-boggling rate.
Of course, none of this is new...
Tesla and its "Steve Jobs-wannabe" CEO Elon Musk have been overpromising and underdelivering for years. Yet analysts and shareholders alike have largely given them a pass.
That appeared to be the case again this quarter. Shares initially rallied in after-hours trading following the results. But they turned sharply lower during the company's post-earnings conference call.
During the 90-minute call, Musk was unusually arrogant and dismissive, even by his standards. And suddenly, the world is taking notice. As financial-news network CNBC reported this morning...
Elon Musk's peculiar post-earnings call was the talk of the market Thursday morning, with one analyst ranking it among the strangest moments of his career.
"Tesla's 1Q18 analyst conference call was arguably the most unusual call I have experienced in 20 years on the sell-side," Adam Jonas, equity analyst at Morgan Stanley, said in a note to clients. "Many investors we spoke with post the call agree."
Amid questions over the electric car maker's cash burn, its relationship with SpaceX and production of the Model 3, Musk cut off the questioners and in some cases chastised them for asking things he didn't like...
He dismissed one question from a key analyst as "boring," then took more than 20 minutes of questioning from a 25-year-old YouTuber. "We're going to go to YouTube. Sorry. These questions are so dry. They're killing me," Musk complained.
In fact, it was so bad, even some of the most-bullish Tesla analysts are now questioning the company's future. More from CNBC...
Consumer Edge analyst Jamie Albertine, who is bullish on Tesla and has a price target of $385, said... Musk's behavior on Wednesday's conference call is a big issue.
"We totally disagree with the way Elon handled himself," Albertine said on CNBC's "Squawk Box" on Thursday. "It's an incredible red flag and we are re-evaluating our stance on the company as a result."
The 'bottom line' is simple...
Tesla is a terrible business... And it is now running dangerously low on cash.
Despite Musk's reassurances, its only real hope for survival is to continue to raise new capital from investors.
Suddenly, that's looking far less certain.
In other news, the Federal Reserve is keeping short-term interest rates unchanged...
During its May policy meeting yesterday, the Fed acted as expected. The bank historically only announces interest-rate changes in months when a post-meeting press conference is scheduled. (May is not one of those months.)
However, the Fed did confirm that inflation has risen to near its official 2% target, and said it expects inflation to remain at or above this level over the next year.
In short, the central bank has been expected to raise rates again next month. And yesterday's announcement strengthened that view. According to CME Group's FedWatch tool, the probability of at least a 0.25 percentage-point rate hike at the Fed's June policy meeting is now 100%.
But yesterday's 'nonevent' didn't keep the market from moving...
As was the case last month, the market turned sharply lower following the Fed's announcement.
All three major U.S. indexes opened lower again this morning. And as we write, the benchmark S&P 500 Index is "testing" an important level of support – its 200-day moving average ("DMA") – for the fourth time since February.
As we noted last week during its third-such occurrence... the more times a level is tested, the weaker it becomes.
If this support gives way, we could see a lower low below the February 9 "volatility panic" bottom.
Again, this is not a reason to panic or to sell all your stocks...
But caution is warranted. The risk of a continued correction is rising.
Our advice remains the same: Hold some extra cash... consider "hedging" with a few short sales or long put options, if you haven't already... and keep a close eye on your trailing stops.
We'd also encourage you to do one more thing...
Join us next Thursday, May 10, at 8 p.m. Eastern time for a special event with our friend Dr. Richard Smith.
You see, Richard says his proprietary TradeStops system can not only tell you the best time to buy or sell any stock... It can also help you distinguish between a garden-variety market correction and the start of a more serious bear market decline. And he'll be joining Porter and Dr. Steve Sjuggerud to show you exactly how it works.
If the recent market uncertainty has kept you up at night, you owe it to yourself to learn more.
This special event is absolutely free for Stansberry Research subscribers. Click here to learn more and reserve your spot now.
New 52-week highs (as of 5/2/18): NovaGold Resources (NG) and Okta (OKTA).
A quiet day in the mailbag. What's on your mind? Let us know at feedback@stansberryresearch.com.
"As a Stansberry's Investment Advisory Lifetime Member, I'd offer an opposite view to Robin V's letter. In this case, you've presented a case that Porter and Steve really don't disagree, they were talking about two different measures. But, as for Robin's opinion, which I respect the right to have, I wouldn't have bought a lifetime subscription if you guys all agreed on everything. That is very dangerous in business, in life, and in getting investment advice. As a matter of fact, Stansberry Research is not the only newsletter I subscribe to for that very reason. Opposing views give far more information that when everyone agrees, in my opinion... for what it's worth." – Paid-up subscriber Dave S.
Regards,
Justin Brill Baltimore, Maryland May 3, 2018