Saturday, February 14, 2015

Richard Zeits Crude Oil Review, Seeking Alpha, February 14, 2015

Richard Zeits crude oil review over at Seeking Alpha.
The overall neutral U.S. petroleum inventory report [February 11, 2015] was hardly a rational excuse for the sharp drop in the price of crude oil on the day of the data release.
On the other hand, the continued recovery in the oil price that has continued is not totally surprising. I would argue that the lack of bad news in terms of continued overall inventory build is positive news for the price of oil which still remains at an extremely depressed, and therefore unsustainable, level.
The market may be anticipating an inflection point in the supply/demand fundamentals which at some point must begin to reflect supply contraction in response to the macro environment.
Having said that, the price of oil remains very vulnerable and difficult to predict in the short term. In the event inventories continue to build, another leg down in oil price cannot be ruled out as storage remains at extremely high level. The deepening short-term contango would add to the pressure on the prompt month crude price.
Lots of data; I'm not sure how much it adds to the discussion when so much about "oil" seems to be "emotional," if that make sense. If tomorrow, Saudi Arabia says they will cut production in half, the market will react ... immediately and emotionally.
Just How Crazy Were Elon Musk's Comments

Bloombergview is reporting:
Musk took his trademark “vision” to audacious new levels, telling analysts this week that he expects revenue increases of 50 percent a year for the next 10 years, which would bring the electric-car maker’s market valuation to an Apple-esque $700 billion by 2025, far from its current valuation of about $25 billion. According to Musk’s numbers, Tesla would have to generate about $350 billion in annual revenue at that valuation, implying sales volume of well over 5 million vehicles per year. That would have Tesla surpassing the 2014 sales of such familiar names as Nissan, Honda and Fiat-Chrysler — at significantly higher profit margins — within a decade.
Musk’s growth projections are feverishly optimistic compared to that of the broader auto industry, which faces flattening global demand, brutal competition and near-certain consolidation. But with less than $2 billion in cash left after burning through nearly half a billion in its fourth quarter, Tesla is also rapidly running out of runway. Though the company expects to burn through less than half its remaining cash this year, true profitability is still five years away.
Musk denied any plans to raise capital “right now,” but it’s unclear how Tesla will make its last billion and change last until profitable volumes are reached in 2020.
From CNBC/Jim Cramer:
Cramer's dreams were crushed in practically every aspect after listening to Musk's conference call Wednesday evening. The company missed the mark on sales, earnings and cash flow and guidance. It is swimming in debt, with a negative $455 million cash flow.
"It is burning money like crazy. It is spending money like crazy. No way the balance sheet can support the investment needed," said the "Mad Money" host.

But the real kicker was the responses provided by Musk to valid questions about earnings.
When asked why sales were weak, and how manufacturing problems held back the company, Musk responded that it was "physically impossible due to a combination of customers being on vacation, severe winter weather and shipping problems."
Customers on vacation?!
Musk then referred to his employees as being "brain-dead" when clarifying that the perceived issue in China was that his sales team gave the incorrect perception that it was difficult to charge cars in China, though it was not.

No comments:

Post a Comment