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Musk: Tesla Will Be Profitable, Cash Flow Positive In Q3, Q4

Musk Tesla

Elon Musk said early on Friday that Tesla would be profitable and cash flow positive in the third and fourth quarters this year, reiterating that the electric vehicle maker is in no need of raising cash—contrary to the opinion of many analysts who see the company burning cash too quickly.

Replying to an article by The Economist on Twitter, Musk tweeted early on Friday: “The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money.”

The Economist had published a link to an article about Tesla’s cash crunch that said that bank Jefferies sees the EV maker in need of raising between US$2.5 billion and US$3 billion this year.

Tesla shares were up more than 2 percent in pre-market trade on Friday after Musk’s tweet, which was in line with the official statements of the company that it doesn’t need to raise cash this year.

“Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines,” the company said earlier this month when it reported Model 3 delivery numbers for Q1, missing its targets again.

Analysts, however, believe that Tesla might need to raise cash this year.

Elon Musk’s April Fools’ tweets joked about Tesla going bankrupt, but analysts aren’t joking when they say that the company may have to tap capital markets before the end of the year to raise funds because it continues to burn a lot of cash. With the continuous Model 3 ‘production hell’, Tesla is likely to find fresh funding more expensive and more difficult to get, according to analysts.

John Thompson, CEO of Vilas Capital, expects Tesla’s stock to crash within six months, and this could trigger a bankruptcy because the company relies on the capital markets to survive.

Related: The Supersized Future Of Energy Storage

According to Vertical Group analyst Gordon Johnson, Tesla’s share price, currently at around US$300 apiece, could nosedive to as little at US$84 by the end of next year as a flurry of competitors crowd the EV market.

In other Tesla-related news, the National Transportation Safety Board on Thursday removed Tesla as a party to its investigation of the fatal crash of a 2017 Tesla Model X in California in March, after having rebuked the company earlier this month for disclosing details of the crash.

“The NTSB took this action because Tesla violated the party agreement by releasing investigative information before it was vetted and confirmed by the NTSB. Such releases of incomplete information often lead to speculation and incorrect assumptions about the probable cause of a crash, which does a disservice to the investigative process and the traveling public,” the board said on Thursday.

By Tsvetana Paraskova for Oilprice.com

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