Tesla Valuation. Will Tesla Burn Out of Cash?

Dear Reader,

The coronavirus disease COVID-19 crisis is a challenging time especially for companies that do not illicit net profits.

Tesla, the electric vehicle manufacturer is a case in point. For full year 2016, 2017, 2018 and 2019 Tesla reported net losses for each year of significantly more than 500 mln. USD. Or if rounded, approximately 1 billion USD losses for each of  the last 4 reported years.

Tesla has approximately 6 billion USD cash on hand. But Tesla also has 16 billion in long-term debt an billions USD more in short-term debts:

https://finance.yahoo.com/quote/TSLA/balance-sheet?p=TSLA

For now, Tesla has been able to survive the above-mentioned huge cash burn by raising funds from its shareholders. Tesla is notoriously unprofitable.

If in the next 2-3 years Tesla does not become profitable, Tesla could well go out of business. Now, due to the coronavirus disease COVD-19 automobile sales are falling to a standstill for virtually every automobile manufacturer around the world. Tesla reportedly recently partly shut down its Fremont California plant or basically was ordered to do so by the California authorities.

https://www.latimes.com/business/story/2020-03-18/coronavirus-tesla-fremont-plant-shutdown

Tesla's 6 billion USD  cash cushion may not last long. Tesla needs to be producing and selling cars to survive. Doing just that is almost impossible as things stand. If the coronavirus economic malaise goes on  for a couple more months almost ceasing all economic activities around the globe Tesla could suffer a huge valuation setback and Tesla's stock could trade at 100 USD compared to 900 USD just two months ago. At 100 USD Tesla would be valued at just 18 billion USD, which means Tesla will trade at distressed valuation and its future as a going concern could be in jeopardy.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Oil Companies Valuation

Dear Reader,

Brent Crude Oil and WTI Crude Oil futures trade at approximately 23 and 20 USD per barrel of oil respectively. There are reports that local types of crude in Canada are trading at 7-9 USD, while some companies in the USA are paying to get rid of oil. With other words some types of oil in certain world regions is actually trading at negative prices.

What are major oil production companies like Exxon Mobil, Chevron, BP, Royal Dutch Shell, Total etc. worth?

It all depends on two factors: the average price per barrel at which these companies extract oil and their cash reserves. The oil companies with low oil extraction costs and large cash piles will survive and most probably devour their smaller and even larger competitors when this oil price war is all over. The companies with high oil extraction costs and low cash reserves will find it difficult to survive.

Especially deep oil drilling and hydraulic fracturing companies(fracking) which all have high costs of extracting a barrel of oil, usually at 35-40 USD, will face huge difficulties to survive.

The valuation of oil companies should be done on a case by case basis. Some companies, which currently do not have large cash piles may be able to liquidate assets. But that seems difficult in the current environment.

So, basically the oil production companies that have already amassed large stocks of liquid assets, have low oil extraction costs or are agile and able to sell assets or even cut a lot of their workforce will eventually survive and thrive.

This period of low oil price will end sooner or later, because Russia and Saudi Arabia which started this oil price war cannot subsist in the long-term at such low oil prices.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich