TESLA BURNS CASH. 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..By Todd Horwitz, Bubba Trading.

 

Tesla Continues to Drop

Tesla Inc. 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 with 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.

Model 3 production probably will pause for about 10 days this quarter, an estimated duration that includes a shutdown last month to address bottlenecks. While Tesla’s battery module line was the main issue plaguing output for months, that’s been resolved, according to the company. Musk now expects to be able to make 5,000 cars’ worth a week before installing an automation system from its German manufacturing unit Grohman.

On the call, Musk said Tesla is poised to surpass all rivals in manufacturing. “A really great production system is primarily a software problem, and there’s no one in the auto industry that is remotely as good as Tesla at software,” he said. “Tesla is way better at software than any other car company.

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Tesla said it plans to reduce capital investments for the year and, along with the increased rate of production, expects to become cash-flow positive in the second half and profitable in the third and fourth quarters.

The electric-car maker posted a loss attributable to common shareholders of $710 million, the fifth consecutive quarter of record losses. On a per-share basis, Tesla reported a loss of $3.35, narrower than the loss of $3.54 predicted by analysts surveyed by FactSet. A year ago, the company had a loss of $1.33 a share.

Keep those stops tight
Todd “Bubba” Horwitz

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.