Elon Musk Promises Profit

Elon Musk took to Twitter on Friday to in a resolute move pledging that Telsa would turn a profit by the third quarter of 2018. The Tesla CEO’s promise was in response to the Thursday tweet by The Economist reporting that the well-regarded Wall Street firm Jefferies believes that Tesla needs to come up with $2.5 billion and $3 billion this year in additional cash flow. Musk immediately took the opportunity to insult the reporting of The Economist and reaffirm that his company will turn a profit in both the third and fourth quarters, indicating that cash flow is not an issue.

Since its inception, Tesla has focused on innovation rather than turning a profit. The company has lost over $4.6 billion since going public in 2010, turning a profit during only two quarters over that time period. Because of the unique market position of the company, Tesla leaders have concentrated on growing the industry of its electric and self-driving cars and have benefited financially from investors and lenders being willing to fund the innovative venture. However, rising concerns over Tesla’s failure to deliver the Model 3 sedan in a timely manner have investors worried and the stock is taking a hit as a result of the concerns. Despite receiving 500,000 orders for the mass-market model, Tesla has only managed to deliver on 12,500 of those orders through the end of March.

Financial analysts believe that if Tesla is able to ramp up the production of the Model 3, Musk’s predictions of profit later this year might come to fruition. The demand is there, but the question is whether Tesla can get the job done. Until Tesla can prove its doubters wrong, its stock is likely to continue being battered around. Moody’s Investor Service recently downgraded the stock to junk bond status and the company has lost 20 percent of its value since its September high. Musk’s brash Twitter promise on Friday only served to raise share prices 2 percent by the end of the trading day, a sign that investors are growing weary of Tesla’s empty promises of increased production.

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