Tesla shares jump as investors bet on Model 3

DATELINE: Tesla Inc’s shares jumped 7.2 per cent yesterday, highlighting investors’ faith in chief executive officer (CEO) Elon Musk’s ability to turn around the company even as it guzzles cash to ramp up production of its mass-market Model 3 sedans.

Gains in the high-flying stock, which has already risen 52 per cent this year, were set to add nearly US$4 billion (RM17.12 billion) to Tesla’s market value.

Tesla said on Wednesday quarterly revenue doubled and that it was receiving more than 1,800 daily reservations for the newly launched Model 3s.

Tesla has burned through over US$2 billion in cash so far this year ahead of the launch, and expects to spend another US$2 billion in the second half.

The company’s aggressive spending has been a lightening rod for criticism, but investors have continued to bet on Musk’s clean-energy vision and the success of the Model 3.

“Early Model 3 launch milestones look strong, but the US$2 billion of 2H capital expenditure will make your eyes water,” said Morgan Stanley analyst Adam Jonas. “Time will tell if they are tears of joy.”

Tesla is counting on the Model 3, launched late last month, to help it turn profitable and transform it from a niche player into an industry heavyweight.

“We believe a positive reception to the Model 3 from early customers could significantly increase the value of the Tesla brand,” said Baird Equity Research analyst Ben Kallo.

However, growing pains, mostly in the form of production delays and funding issues, are challenges that Tesla needs to overcome. Reuters