1. Wall Street is Worried that Tesla's Going Broke Yet Again

    Wall Street is Worried that Tesla's Going Broke Yet Again
    • After two profitable quarters in a row, Tesla is once again in financial trouble.
    • The company has guided down expectations for Q1, and analysts are worried about margins on the new Model 3.
    • Plus, the company has taken on more debt and has a $566 million bill to pay in November...
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    1. International deliveries have begun and are not progressing without some delays; when combined with our expectation that Model S/Model X deliveries disappoint (we lower our 1Q19 delivery forecast), we now expect a meaningful working capital headwind in 1Q19 — and for quarter-ending cash to come closer to the $2bn mark.
    2. We believe Tesla management has a reasonably good handle on its cost trajectory, so whether Tesla can indeed achieve its 25% gross margin target before the end of this year may largely depend on the trim mix of Model 3 demand.
    3. In our view, the recent announcement by Tesla of its upcoming Model Y unveiling event was perceived negatively by the market, partly due to concerns that Model Y could cannibalize current Model 3 sales given the general industry shift from sedans to trucks/SUVs.
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