Contrite CEO is back in investors’ good books

Shares of Tesla rallied after the company convinced investors it was able to produce a positive cash flow and turn a profit, and CEO Elon Musk apologised for past incendiary remarks.

Musk, in a conference call on Wednesday, addressing Tesla’s largest quarterly loss to date, said the electric-car manufacturer would not need to raise more cash and that capital expenses would be slightly below $2.5bn (about R33.5bn) in 2018, lower than most estimates.

But it was his remorse that highlighted the call. Previously, he had insulted some analysts — turning off shareholders and investors and knocking $2bn off Tesla’s market cap. “I would like to apologise for being impolite on the prior call. Honestly, I think there is really no excuse for bad manners. I was kind of violating my own rule in that regard,” Musk said.

“Elon’s tone was generally improved versus last quarter, which may seem trivial, but Tesla stock has become somewhat of an Elon sentiment gauge,” RBC analysts said.

Musk reiterated a target of producing 6,000 Model 3 sedans a week by late August. Tesla produced 5,000 a week in July, but after delays in reaching that target analysts were concerned whether it could maintain the production rate.

“After three quarters where investors have been in the dark with respect to estimating Model 3 volumes and margins, Q2 felt like there might finally be some light at the end of the tunnel,” Evercore analysts wrote. “Come Q3, we may even be able to see the end of the tunnel, or Elon’s ‘Production Hell’.”

Tesla had a record loss of $718m in the second quarter, but investors and analysts focused on the positives, and on Musk’s behaviour on the conference call.