Author: CNBC Online news

Tesla is having its best week since October, but investor says bear case is still strong

VIDEO1:5401:54The bear case for Tesla remains strong, market watcher saysTrading NationTesla is back in gear.
The stock has rallied 12% this week in its best weekly stretch since October. Since a low Monday morning, it has revved 17% higher.
“For the bulls on Tesla you're really happy that the month of May is over and June has come. What a rally in the stock,” John Petrides, managing director and portfolio manager at Point View Wealth Management, said Thursday on CNBC's “Trading Nation. ”
Now Tesla faces two potential paths, he said.
“I really do think the stock is at a crossroads here. Tesla is a very polarizing name. You either have a strong conviction on the upside or you have a strong conviction on the downside – there's no in between,” Petrides said.
While bulls have rushed in this week, Tesla still generates a lot of skepticism on Wall Street. The stock is one of the most heavily shorted at 31.4% of its float. High short interest levels indicate a large number of investors are making a bet the shares will move lower.
Petrides said both the bulls and the bears have their talking points, but he leans toward one of those arguments.
“If you're buying here today, you're buying it for the long term. You think that Tesla will continue to dominate the electronic market five years from now. Or you think they're going to drown in their own debt and burn through cash and the stock is going to go consistently lower,” he said. “We're on the case of the bear side.”
Tesla's high debt load has caused concern among Wall Street firms and investors. Morgan Stanley recently cited Tesla's debt load and access to capital alongside weaker demand as reasons for concern over its stock price. The firm said its worst-case scenario would take the stock down to $10.
“We think that valuation is just not attractive for this capital-intensive business where more competition has come into the market,” added Petrides.
Tesla's price-earnings ratio, a measure of valuation, still trades as high as 121 times forward earnings even after the stock's steep decline this year. The Invesco QQQ ETF, which tracks the Nasdaq 100, trades at just 20 times forward earnings.
Even with this week's rally, Tesla shares remain on track for their worst annual performance ever. The stock has fallen 37% since the beginning of the year.

Ford issues safety recall on Explorer SUVs, citing potential steering problem

2014 Ford ExplorerSource: Ford Motor Co.Ford is issuing a safety recall on 1.2 million Explorer SUVs, primarily in the United States, citing a potentially dangerous suspension defect, the company said Wednesday.
The defect could cause a component in the suspension on select vehicles sold in the 2011 to 2017 model years to break, compromising drivers' control of steering. Ford said in its statement that a customer reported an accident with a curb when the component broke but that the company was not aware of any injuries attributable to the problem.
Ford estimates repairing the suspension issue in the vehicles will cost $180 million, and it will be incurred in the second quarter, according to a filing with the Securities and Exchange Commission. The company's annual revenue in 2018 was $160.3 billion.
The company also issued recalls on F-150 trucks and Econoline vans, as well as Taurus and Flex sedans and Lincoln MKS and MKT sedans in Canada, citing suspension issues, transmission calibration problems and faulty welding, which could lead to a sudden loss of engine power in some vehicles. These recalls affect about 139,000 vehicles total.
Ford did not specify how much these repairs will cost the company. Affected vehicles came from Ford plants throughout the U.S., including Ford's Chicago, Dearborn, Kansas City and Oakville plants.
Ford shares were trading down less than 1% on the news.

Tesla loses key Autopilot engineer to self-driving truck start-up Embark

Embark self-driving truckEmbarkZeljko Popovic, a leader within Tesla's Autopilot team, is leaving for Embark, the autonomous trucking start-up in San Francisco, according to a person familiar with the move. Embark confirmed the hire.
The departure comes at a critical time, as Tesla is promising its electric vehicles will be capable of operating as “robotaxis” by the end of next year — which is to say, they'd be fully self-driving in normal conditions, without human intervention. Tesla also says it plans to start production of its long-awaited electric semi trucks by the end of 2020.
Popovic, whose background is in robotics, built and ran the perception team for Tesla's Autopilot division.
According to people familiar with his accomplishments there, Popovic managed the development of highly accurate maps of U.S. highways for Tesla, and created a “sensor fusion system” which combines data from the many cameras, radars and ultrasonic sensors that Tesla vehicles employ. The sensor fusion system enables Autopilot to “see” other cars on the road.
At Tesla's annual shareholder meeting this week, CEO Elon Musk acknowledged that some Tesla self-driving features still need improvements. “Summon,” which allows a driver to automatically call their car over from wherever it is parked, was supposed to be widely available by now. But at the meeting, Musk said it is still being tweaked.
Founded in 2015, Embark integrates its self-driving systems into Peterbilt semis rather than building its own trucks completely from scratch, and the trucks are generally operated with human supervisors behind the wheel. It now has more than a dozen trucks and 60 employees. Amazon is using self-driving trucks developed by Embark to haul some cargo on the I-10 interstate highway in California, both companies previously acknowledged.
Attrition has been a big issue for Tesla in the last two years as the company has missed some of its production goals and its stock price has swung wildly. Among others, self-driving VP Jim Keller left for Intel, and head engineer Doug Field rejoined Apple to work on that company's secretive self-driving technology.
Popovic and Tesla did not immediately respond to requests for comment.
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Elon Musk says Tesla still plans to offer insurance, but is waiting for an acquisition to close

Elon MuskJim Watson | AFP | Getty ImagesOn Tuesday, during Tesla's annual shareholder meeting, CEO Elon Musk said an insurance offering that he expected his car company to launch in May this year is actually still in the works.
Musk said, “We're pretty close to being able to release that. We have a small acquisition that we need to complete and a bit of software to write.”
Back in April, Musk said on an earnings conference call that Tesla would be launching its own insurance product in about a month. He said that Tesla has an advantage in insurance, because it has “direct knowledge” of a person's risk profile “based on the car,” which gives Tesla an “information arbitrage opportunity.”
In 2017, Automotive News reported that Tesla clashed with auto-insurance providers AAA The Autoclub Group when they raised premiums for Tesla drivers, based on research by the Highway Loss Data Institute and others. They had said the Model S and Model X had high claim frequencies and high costs of insurance claims.
The idea behind Tesla offering its own insurance would be to lower rates for drivers, leveraging internal data from Tesla's AutoPilot systems to justify that.
Berkshire Hathaway's Warren Buffet predicted that Tesla will struggle if it goes into the insurance business. “I'd bet against any company in the auto business” getting into insurance, he said. “I worry much more about Progressive.” About one third of Berkshire Hathaway's business is in the insurance space and that includes Geico.
— CNBC's Fred Imbert contributed to this story.
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Elon Musk at Tesla shareholder meeting: ‘It won’t be long before we have a 400-mile range car’

VIDEO8:3508:35Tesla shares could see Netflix-like recovery: Consumer trend expertFast MoneyTesla CEO Elon Musk spoke at the company's annual shareholder meeting in Mountain View, California on Tuesday, telling investors, “It won't be long before we have a 400 mile range car.”
He also said that sometime next year, Tesla drivers will be able to use self-driving features in their vehicles without intervention.
Musk said, “Every car made since October 2016 is capable for full autonomy with replacement of the computer alone.” He also added, “We'll still need regulatory approval but the capability will be there. This massively increases the value of the car. In fact, I think it's basically financially insane to buy anything except an electric car that is upgradable to autonomy.”
Tesla CEO Elon Musk speaks during the unveiling of the new Tesla Model Y in Hawthorne, California on March 14, 2019.Frederic J. Brown | AFP | Getty Images(It would be unprecedented for a car to appreciate in value near-term. It is rare when cars become a collectors' choice, and gain value over a longer time.)
Tesla CTO and co-founder JB Straubel, who has rarely been seen in public in recent days, joined Musk on stage at the meeting to thank teams that built the company's battery tech and massive US battery plant, the Gigafactory. Tesla jointly owns and operates that factory with Panasonic, its primary supplier of cells for its vehicle batteries today.
Musk and Straubel also showed a picture of a green field in Europe, joking that this would one day be their Gigafactory in Europe. The company aims to establish a car factory on each continent, Musk said. By the end of this year, they intend to determine and announce the location for another battery-and-car plant in Europe.
The execs were also joined by Drew Baglino, who has been with Tesla for 14 years and leads battery, power train and solar roof projects.
The electric vehicle and renewable energy company is on the hook to produce and deliver 90,000 to 100,000 cars to customers by the end of this quarter, per its earlier guidance, which has been reiterated by execs, including Musk and CFO Zach Kirkhorn, throughout the period.
Tesla is also trying to make and sell more cars with fewer employees in the US, having laid off hundreds in cost-cutting measures earlier this year. At the same time, it is expanding operations internationally, with a new battery plant and car assembly, known as Gigafactory 3, under way in Shanghai.
Musk also told shareholders that they should expect an unveiling of the Tesla pickup truck towards the end of the summer of 2019, and production of its larger electric Semi truck by the end of 2020.
Outside the venue where the shareholder meeting took place, the Computer History Museum in Mountain View, California, Tesla showed off prototypes of its forthcoming Roadster, Semi and Model Y, prompting fans and shareholders to post snapshots on social networks.
The annual meeting marks the first for Tesla since Oracle founder Larry Ellison and Walgreens Boots Alliance executive Kathleen Wilson-Thompson joined the company's board of directors late last year. (Ellison was in attendance on Tuesday.)
When asked about Tesla's financial prospects for 2019, Musk said, “Profitability is always challenging if you're a fast-growing company.” He said that Tesla is on-target to grow its entire “fleet” by 60% to 80% this year, and said, “It's hard to be profitable with that level of growth.” He said the company could be cash-flow positive while growing at that rate.
Tesla stock has been edging higher in recent days after favorable analyst reports and electric vehicle sales forecasts from the likes of Morgan Stanley and IHS Markit, respectively. Tesla shares closed on Tuesday at $217.10, down about 36% since this time last year when they were trading near $342.
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Volkswagen concludes partnership with self-driving start-up Aurora, in talks with Ford

Julian Stratenschulte | picture alliance | Getty ImagesVolkswagen has ended its relationship with Amazon-backed self-driving start-up Aurora, and is now considering partnerships with Ford and competitor Argo AI, CNBC has confirmed.
Three people familiar with the matter first told the Financial Times that after a trial run that lasted a few months, the German automaker declined to renew the 2018 contract with Aurora. A new deal with Ford, however, could be reached by summer, according to the FT.
“The activities under our partnership have been concluded,” a Volkswagen spokesperson told CNBC.
Volkswagen previously sought to acquire Aurora following General Motor's acquisition of Cruise and Ford's $1 billion commitment to Argo AI.
Aurora on Monday announced a partnership with Fiat Chrysler to develop self-driving vehicles for corporate clients. The start-up also raised more than $530 million in an Amazon-led funding round in February, valuing the company at more than $2.5 billion.
Ford did not immediately respond to CNBC's request for comment.
Aurora will continue to use the VW e-Golf in development of its driverless vehicle systems, the company confirmed. Aurora also characterized the end of the partnership as amicable, and said there was potential to work together again down the line.
“Volkswagen Group has been a wonderful partner to Aurora since the early days of development of the Aurora Driver. As the Driver matures and our platform grows in strength, we continue to work with a growing array of partners who complement our expertise and expand the reach of our product,” an Aurora spokesperson told CNBC.
Volkswagen and Ford announced plans in January to partner up on the development of light commercial vehicles, and said they were considering other projects. Volkswagen has also committed over $50 billion to develop more than 50 pure battery-electric vehicles by 2025, to be sold through brands like Porsche and Audi.

Bernstein says Tesla won’t be bought: ‘We struggle to see it being sold as a going concern’

Tesla CEO Elon Musk attends the Tesla Shanghai Gigafactory groundbreaking ceremony in Shanghai, China, January 7, 2019.Aly Song | ReutersIt's looking less and less likely that Tesla will find a buyer to save it from its financial struggles and offer it a source of new funding, Bernstein told clients on Monday.
European autos analyst Max Warburton wrote in a note that while Volkswagen's CEO may take a look, there really wouldn't be much support for a bid to acquire any of Tesla's assets.
“What assets are attractive? Tesla no longer has genuinely differentiated tech. The production plant is sub-par. The Gigafactory is probably not essential (and may be claimed by Panasonic),” Warburton wrote. “The brand still has value, albeit one that is declining fast. The Supercharger network also has some value. Perhaps these get picked up. But at what price?”
VIDEO7:0807:08Technician: Tesla so bad, it's worth buying nowFast Money “We struggle to see it being sold as a going concern,” he added.
Tesla used about $950 million of cash in the first quarter (for a combined $5 billion of cash burn since 2017), prompting renewed concerns over its long-term financial health. A few weeks ago, Tesla managed to raise $2.35 billion in new capital, with $750 million of common stock and $1.6 billion from convertible bonds. Others have suggested that another technology company, like Apple, could swoop in and buy Tesla when its assets cheapen.
Roth Capital Partners analyst Craig Irwin told CNBC last month that the electric car company could have sold to Apple six years ago at $240 per share. The stock is down 48% over the last six months at $185.16 a share.
Even though Warburton isn't Bernstein's Tesla analyst, he does cover a number of European auto companies that could be in for a pop if Tesla fails. The Palo Alto, California-based automaker has put “huge pressure” on the valuations of traditional equipment manufacturers in Europe as Tesla's initial success suggested that the barriers to entry in the electric vehicle market weren't as onerous as once thought.
“Its technology seemed ahead of all other OEMs — damaging the Germans' relative brand position. Tesla took market share from the German OEMs in the US, UK and some other regions,” Warburton wrote.
But “financial failure of Tesla would force a change in investors' views of traditional OEMs. It would show how difficult it is for a new entrant to succeed,” he added. “Most important: it would change views on the size and growth rates of the EV market.”
Bernstein's main Tesla analyst, Toni Sacconaghi, has a market weight rating on shares of Tesla.

Hertz shares jump after rental car company unveils subscription service starting at $999 a month

Passengers wait to get on a Hertz shuttle bus at Los Angeles International Airport.Patrick T. Fallon | Bloomberg | Getty ImagesHertz Global Holdings stock jumped more than 8% Tuesday after the car rental company announced a new vehicle-subscription service called Hertz My Car, which will launch as a pilot program in Atlanta and Austin, Texas.
Hertz is up more than 5% over the past 12 months and more than 12% so far this year.
The monthly subscription service is an alternative to traditional vehicle ownership, which the company said has become less popular in urban areas. It will cost subscribers between $999 and $1,399 per month, depending on which vehicle package they choose.
The pilot program will grant customers access to various automobiles through the two subscription tiers and allow them to exchange vehicles twice a month for different models. The subscription will cover vehicle maintenance, roadside assistance, damage and limited liability protection, the company said.
Hertz said the service is part of a greater shift away from traditional vehicle ownership. The company shared a survey by Cox Automotive where roughly 40% of respondents said that while access to transportation is necessary, owning a vehicle is not.
“We feel well positioned to lead in vehicle subscription services,” said Jayesh Patel, Hertz Senior Vice President of Brand. “We've seen growth in our longer-term rentals in recent years which we believe is one of several positive indicators the time is right for this service.”
Hertz's stock has fallen more than 20% since the beginning of March, when long-time investor Carl Icahn said he trimmed his stake in the company.
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