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Tesla capital spend to soar 340% in second half ahead of Model 3

Published

9 years ago

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It’s no secret that Tesla chief Elon Musk has awe-inspiring plans to reshape the transportation and energy sector as we know it. Since the reveal of the company’s second master plan, the billionaire entrepreneur CEO has announced Tesla’s goals to acquire SolarCity, unveil a Tesla Semi that will tackle the heavy-duty trucking segment, develop a ride-sharing program, and, of course, build out the remaining 86% of the company’s already enormous battery facility – the Gigafactory.

Execution on Tesla’s grand ambitions will require billions of dollars. Having built a $3.25 billion cash position helped by the company’s raise of $1.7 billion earlier in the year, Tesla will need to expertly balance its capital expenditure, as it continues to build vehicles and sustain its auto business, with capital allocation towards new development and growth.

Tesla management had originally projected capital expenditures of $1.5 billion in 2016, but given the stellar early success of the company’s mass market Model 3: the company would see huge demand in the first month of the vehicle’s unveiling and take in close to 400k reservation deposits, Musk took to Twitter to announce, “Definitely going to need to rethink production planning…” And that, they will.

Huge demand for the Model 3 has prompted the company to accelerate its original target of producing 500k vehicles per year from 2020 to 2018. Tesla explains this in the company’s Q1 shareholder letter as follows:

“Given our plans to advance our 500,000 total unit build plan, essentially doubling the prior growth plan, we are reevaluating our level of capital expenditures, but expect it will be about 50% higher than our previous guidance of $1.5 billion for 2016. Naturally, this will impact our ability to be net cash flow positive for the year, but given the demand for Model 3, investing to meet that demand is the best long-term decision for Tesla.“

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Financial Analyst Daniel Sparks notes via The Motley Fool, Tesla management expects to invest $2.25 billion in capital expenditures during the second half of this year on production planning for the Model 3. This amounts to an over three-fold or 340% increase in spending when compared to the first half of the year. Tesla made mention of this during the company’s second-quarter shareholder letter, as noted by Sparks. “Despite the disciplined pace of capital spending in the first half of this year, we still expect to invest about $2.25 billion in capital expenditures in 2016, in support of our accelerated production plan for Model 3.”, Tesla explained.

Investors are keeping a watchful eye on the Silicon Valley electric-car maker while it continues to make headway on its ambitious growth plans. It wouldn’t come as a surprise if Tesla will need to raise more capital (or sell an unprecedented amount of P100Ds) before being able to put a bow on its second master plan.

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Investor's Corner

Elon Musk praises Ray Dalio’s Bridgewater for accumulating TSLA stock

Published

3 weeks ago

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February 14, 2025

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Credit: Tesla Asia/X

A recent 13-F filing from legendary investor and billionaire Ray Dalio’s Bridgewater Associates has revealed that the hedge fund has added over $62 million worth of Tesla stock (NASDAQ:TSLA) to its portfolio.

Elon Musk has praised the billionaire’s investment in a post on X.

Bridgewater’s TSLA stake:

  • As per Bridgewater’s 13-F filing, it currently holds 153,589 shares of TSLA, which costs $62,025,382.
  • The firm added the TSLA shares in the fourth quarter.
  • Tesla shares gained momentum after its Q3 2024 earnings call, and it only gained more strength after the election of U.S. President Donald Trump.
  • At the end of 2024, Tesla shares were up 62%, as noted in a MarketWatch report.
  • Tesla stock is still up 88% over 12 months despite a steep drop over the past month.

A vote of confidence: 

  • Bridgewater Associates is one of the largest hedge funds in the world, so the firm’s stake in TSLA could be interpreted as a vote of confidence in the electric vehicle maker.
  • Elon Musk has praised the firm’s investment. In a post on X, Musk noted that Bridgewater’s investment was a “smart move.”
  • Elon Musk has been quite consistent on his idea that Tesla could eventually become the world’s most valuable company. He emphasized this point during the Q4 2024 earnings call.
  • “I see a path. I’m not saying it’s an easy path but I see a path of Tesla being the most valuable company in the world by far. Not even close. There is a path where Tesla is worth more than the next top five companies combined,” Musk said.

Don’t hesitate to contact us with news tips. Just send a message to simon@teslarati.com to give us a heads up.

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Investor's Corner

Tesla (TSLA) gets $475 price target and “Buy” rating from Benchmark

Published

4 weeks ago

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February 12, 2025

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Credit: Tesla

Tesla shares (NASDAQ:TSLA) have received a “Buy” rating and a $475 per share price target from Benchmark.

Benchmark’s price target is based on 68.2 times its 2028 earnings before interest, taxes, depreciation, and amortization (EBITDA), as noted in a Morningstar report.

Tesla rating:

  • In a note to clients, Benchmark analyst Mickey Legg noted that Tesla has outlined a path towards more growth through several of its initiatives.
  • These include Tesla’s work in autonomous driving systems, robotics, and energy generation.
  • The company could also make more headway into the electric vehicle segment.
  • “The company has outlined a path for growth with a more affordable vehicle scheduled for 1H25, unsupervised full self-driving as a paid service this June in Austin, TX, and Optimus robot production ramp through 2026 and beyond,” the analyst stated.

More potential:

  • While he sees potential in Tesla, the Benchmark analyst noted that his current model only incorporates vehicle growth. 
  • Thus, there could be “significant potential upside” if the company’s autonomous vehicle program and Optimus are scaled.
  • “Tesla’s market leadership, near-term catalysts, strong management, and diversified business justify the stock’s market premium,” Legg noted.

Don’t hesitate to contact us with news tips. Just send a message to simon@teslarati.com to give us a heads up.

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Tesla is ‘better-positioned’ as a company and as a stock as tariff situation escalates

Published

1 month ago

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February 3, 2025

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The Cybertruck-towed Model Y ad at Hayden Planetarium. Credit: Tesla North America | X

Tesla is “better-positioned” as a company and as a stock as the tariff situation between the United States, Mexico, and Canada continues to escalate as President Donald Trump announced sanctions against those countries.

Analysts at Piper Sandler are unconcerned regarding Tesla’s position as a high-level stock holding as the tariff drama continues to unfold. This is mostly due to its reputation as a vehicle manufacturer in the domestic market, especially as it holds a distinct advantage of having some of the most American-made vehicles in the country.

Analysts at the firm, led by Alexander Potter, said Tesla is “one of the most defensive stocks” in the automotive sector as the tariff situation continues.

The defensive play comes from the nature of the stock, which should not be too impacted from a U.S. standpoint because of its focus on building vehicles and sourcing parts from manufacturers and companies based in the United States. Tesla has held the distinct title of having several of the most American-made cars, based on annual studies from Cars.com.

Its most recent study, released in June 2024, showed that the Model Y, Model S, and Model X are three of the top ten vehicles with the most U.S.-based manufacturing.

Tesla captures three spots in Cars.com’s American-Made Index, only U.S. manufacturer in list

The year prior, Tesla swept the top four spots of the study.

Piper Sandler analysts highlighted this point in a new note on Monday morning amidst increasing tension between the U.S. and Canada, as Mexico has already started to work with the Trump Administration on a solution:

“Tesla assembles five vehicles in the U.S., and all five rank among the most American-made cars.”

However, with that being said, there is certainly the potential for things to get tougher. The analysts believe that Tesla, while potentially impacted, will be in a better position than most companies because of their domestic position:

“If nothing changes in the next few days, tariffs will almost certainly deal a crippling blow to automotive supply chains in North America. [There is a possibility that] Trump capitulates in some way (perhaps he’ll delay implementation, in an effort to save face).”

There is no evidence that Tesla will be completely bulletproof when it comes to these potential impacts. However, it is definitely better insulated than other companies.

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Please email me with questions and comments at joey@teslarati.com. I’d love to chat! You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.

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