Autos

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

If you're buying more Tesla stock on Friday because of Thursday night's big electric-truck reveal, then you may be experiencing a strange form of financial déjà vu.

Because if you already owned Tesla Inc.'s stock, then you had already bought into the electric truck -- just as you had already bought into the Powerwall, the electric minivan, some kind of robo-taxi business, solar roofs and, crucially, mass production of the Model 3 car.

With a market capitalization of $52.5 billion, Tesla is already valued at 54 times free cash flow -- in 2020 that is, according to consensus estimates. And do you know how accurate consensus forecasts for Tesla's free cash flow three years out tend to be?

You Could Drive A Truck Through It
The gap between the consensus forecast in early 2013 for Tesla's free cash flow in 2016 and the actual result turned out to be $1.8 billion
Source: Bloomberg

The point is, with free cash flow so far off, terminal value is all here, so there's a truck-load of expectations built into Tesla's price already.

The event itself had the usual fanfare, with shouted cries at one point for CEO Elon Musk to run for president or -- a touch of old-world charm here -- emperor. The trucks looked sleek and futuristic, with the driver seated in the center of the cab and shielded by a huge windscreen that can, apparently, withstand a nuclear explosion. Musk began by boasting the truck could get from zero to 60 miles per hour in five seconds without a load; 20 seconds pulling 80,000 pounds. This is fast for a car, let alone a truck.

Yet I couldn't help wondering why the sales pitch would lead with speed. Truck-fleet owners are concerned primarily with costs and reliability; it is less clear why their drivers should be able to dash away from the lights with a trailer of machine parts.

Tesla claims the truck will have 500 miles of range and get another 400 miles in 30 minutes at planned "megachargers." These will, apparently, be solar-powered so that the truck is, effectively "running on sunlight," Musk said. And Tesla will guarantee a price of just 7 cents per kilowatt-hour for that power, in line with the current average for industrial users. Autonomous features will come as standard. All-in, the truck will be 17 percent cheaper to run, mile for mile, than a diesel truck, Tesla claims.

Let's acknowledge that if Tesla produces a truck with those specs and cost-advantage, and a charging network that clean and powerful, at mass volume, then it would be a game-changer.

But right now, it's just a claim backed by a couple of demonstration models. In particular, the touted per-mile cost advantage lacked important details, like the price of the truck or even the size of the battery.

This might matter less if Tesla were delivering on the Model 3, the mass-market car on which its prospects of getting anywhere near self-funding rest entirely. Instead, Tesla will be lucky to produce even 5 percent of its original target for the second half of this year. So it's odd to now be pushing into the even more challenging task of electrifying semis. While it makes for a great show, it actually exacerbates Tesla's growing credibility problem.

The real tell at Thursday's event came at the end, when an updated version of Tesla's original sports car, the Roadster, suddenly appeared from the back of one of the trucks in dramatic fashion. Tesla claims this will get to 60 mph in less than two seconds and go more than 600 miles on a charge. It also put a price on this one: The first 1,000 will go for $250,000 apiece -- if you pay it all up front and can wait until 2020 for delivery.

Like the deposit scheme Tesla set up last year for the Model 3, and the $5,000 deposits it is now asking for the truck, that $250 million of up-front checks for the new Roadster has a distinct kickstarter feel to it.

There are no doubt a thousand fans out there willing to drop a quarter-million on a car they might get in three years. Even so, $250 million is relative chicken-feed for a company currently burning through that much every two to three weeks (though the enthusiasm around it may help with another equity round, should Tesla choose to launch one).

Could Use A Boost
Tesla's stock hit an all-time high in September but has since fallen by 20 percent, largely due to problems with the Model 3
Source: Bloomberg

More importantly, the new Roadster is another project to add to Tesla's pile, and a distraction from the company's critical issue. While the new vehicle wowed the crowd, it would have been far better from an investor's point of view if Tesla had instead unveiled a fleet of Model 3s built on a fully functioning production line.

Like anyone wiring Tesla deposits for a yet-to-be-built truck or sports-car, if you buy the stock today, you're getting the promise of something. Let's see if it arrives.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in New York at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net