Tesla: Andrew Left changes view because it’s destroying competition

Andrew Left, founder of Citron ResearchBloomberg screenshot

• Short seller Andrew Left changed his view on Tesla and bought the stock ahead of the company’s crucial earnings. 
• Left said Tesla is destroying the competition and that “there is NO Tesla killer.”
• The electric-car maker reports after Wednesday’s closing bell.
• Watch Tesla trade in real time here.

Tesla jumped 5% Tuesday after short seller Andrew Left changed his view and bought shares ahead of the company’s crucial third-quarter earnings report.

“Tesla is destroying the competition,” Left said in a published Tuesday by his firm, Citron Research. 

“For the first time, Citron is long Tesla as the Model 3 is a proven hit and many of the TSLA warning signs have proven not to be significant.”

Tuesday’s announcement may come as a suprise for some because Left filed a lawsuit against Tesla in September, alleging CEO Elon Musk was trying to burn short sellers like himself.

“Defendant Musk has a long-standing public feud with short-sellers,” Left’s attorney, James Wagstaffe, said in the filing. 

He continued: Musk’s “statements were an ill-conceived attempt to artificially manipulate the price of Tesla securities in order to “burn” and “squeeze out” the company’s short-sellers.” 

According to Left, the media has been focused too much on Musk’s personal behavior — such as smoking marijuana during a live interview and taunting of short sellers — but has failed to notice Tesla’s dominance in the electric-vehicle market. He believes Tesla is easily beating traditional automakers with a high level of connectivity and “upgradeability” in Tesla cars, and that no other electric vehicle can compete in the short term.

Earlier this month, Tesla said it delivered 55,840 Model 3 sedans in the third quarter, beating its own guidance of 52,425 and Wall Street’s expected 55,600. The electric-car maker also said it’s on track to deliver 100,000 Model S and Model X vehicles for 2018. In an email dated September 30, Musk told employees the company is “very close to achieving profitability.” 

And last week, Tesla announced a lower-priced version of its Model 3 sedan, starting at $45,000. In California, the cheaper model will cost $35,000 after federal and state tax rebates, Musk said.

“There is NO Tesla killer,” Left added. “Competition is nowhere to be found and no electric vehicle is slated to launch at the Model 3 price point until 2021.” By his calculation, Tesla will be trading at $599 in the worst-case scenario of 500,000 deliveries, an auto gross margin of 20%, and a price-to-earnings ratio of 20%. 

And a recent report from Berenberg agrees that Tesla doesn’t have a real challenger. It said that Nio, a China-based electric-car maker widely touted as the Tesla “killer” when it went public in the US last month, is not a major threat to Telsa. 

According to Berenberg, Nio is a pure play in China where Tesla only has about 15% of group sales, which means its dominance in the market has a limited overall impact on Tesla. Moreover, Tesla’s product is materially ahead of the competition in the Environmental Protection Agency range, an estimate of the number of miles an electric vehicle should be able to travel from a full charge. Tesla’s Model X has an EPA range of 335 miles, while the Nio ES8’s is at 154 miles.

Tesla will report its third-quarter earnings after the bell on Wednesday. Analysts surveyed by Bloomberg are expecting an adjusted loss of $0.08 a share on revenue of $6.273 billion.

Tesla was down 14% this year.

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