Tesla shares jump as in­vestors bet on Model 3

New Straits Times - - Business -

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

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