Most of the headlines were on Elon Musk's Hyperloop One publicity stunt. This is what they were looking away from.
Two key components of Elon Musk's empire are under pressure, and some analysts don't see relief in sight anytime soon.
Shares of SolarCity and Tesla Motors, both co-founded by Musk, have taken hits recently. Tesla, once a darling of Wall Street, is down more than 16 percent in the past month alone despite a warm reception for its Model 3. Meanwhile, SolarCity was walloped this week after quarterly earnings fell short of market estimates...
For those reasons, Langan believes Tesla is overvalued. He also takes issue with the company's aggressive production target of 500,000 cars by the end of 2018. Tesla own estimates for production were bullish. It cited demand for the Model 3, its mass-market car expected to hit in 2017.
"That's a very aggressive target, even for any established automaker, so I think that's very tough to achieve and that's going to put the stock at risk," he said in a recent interview with CNBC's "Power Lunch."
"And there's a question of can they actually continue to grow, given they already have actually pretty good share in the high-end luxury sedan segment."...
Meanwhile, SolarCity plunged after the company reported a wider-than-expected quarter loss and gave disappointing guidance Monday. The solar power company is down about 63 percent year to date.
"They are defining things differently than you typically define things in economics. One of the major problems is they've redefined how you calculate their costs; they've redefined how you should look at their revenue," he explained.
"You have a business where you burn a ton of money but you just issue debt, and that means you are generating cash. And that is really the concern that investors have."
This reality distortion field that Elon Musk carries around with him, in which he jumps from imaginary government subsidized industry to imaginary government subsidized industry is funded by taxpayers.
Without government intervention, green energy moguls like Elon Musk would need to invest and risk their own money on costly solar power projects. Without U.S. taxpayers to foot the bill for these dubious schemes, government intervention would not be possible...
Bloomberg News reported back in October that SolarCity has lost money “in all but two quarters” since its IPO. That’s not very comforting. Yet, it continues to receive preferential treatment from government officials who are supposedly elected to watch out for the public interest.
And the money keeps on rolling in. If it stops, Musk announces another huge project. Like the Hyperloop.
Elon Musk received $1.4 billion in taxpayer support from Nevada to build a “gigafactory” for Tesla Motors. Musk serves as CEO, chairman and founder of Tesla. SolarCity also received a large cash “incentive” to move to Nevada.
And Tesla? Do you even have to ask.
Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.
"He definitely goes where there is government money," said Dan Dolev, an analyst at Jefferies Equity Research. "That's a great strategy, but the government will cut you off one day."
Tesla and SolarCity continue to report net losses after a decade in business, but the stocks of both companies have soared on their potential
And hard times are coming for Tesla.
The federal government's 30% tax credit for solar installations gets slashed to 10% in 2017 for commercial customers and ends completely for homeowners.
Tesla buyers also get a $7,500 federal income tax credit and a $2,500 rebate from the state of California. The federal government has capped the $7,500 credit at a total of 200,000 vehicles per manufacturer; Tesla is about a quarter of the way to that limit. In all, Tesla buyers have qualified for an estimated $284 million in federal tax incentives and collected more than $38 million in California rebates.
California legislators recently passed a law, which has not yet taken effect, calling for income limits on electric car buyers seeking the state's $2,500 subsidy. Tesla owners have an average household income of about $320,000, according to Strategic Visions, an auto industry research firm.
That's going to be a problem. But welcome Hyperloop One. And after Hyperloop One, maybe nanotechnology or cold fusion. Whatever works well as a publicity stunt and captures the imagination of aspiring technocrats.