Elon’s actions are making it harder and harder to support Tesla as a company. His actions directly affect Tesla’s share price because Elon is Tesla. That said, we still believe there is more upside to shares. 

A Few Takeaways

1. Big picture: regardless of Musk’s actions, if Tesla can sell more than 60,000 Model 3s per quarter at a gross margin of 20% or greater, the company will be successful. This factors in demand, production, and profitability. We expect the company to sell 55k Model 3s in the Sep-18 quarter.
2. We think Tesla will successfully ramp the Model 3 to profitability and reach escape velocity. However, in the 15% chance that Tesla needs to raise money, yesterday’s interview just made it harder.
3. Musk is not going to be conventional. Breaking the mold is part of his PR strategy. While we believe Tesla’s board is trying to put controls in place to limit behavior like this, it’s clear Elon has a different plan.
4. At times, Musk appears to be working against himself. At the core, we believe he wants to prove his doubters wrong, but many of his actions strengthen the case against him. If he wanted to prove them wrong with actions he would delete Twitter, drop the Unsworth conversation, and not use recreational drugs in a public setting.
5. The use of recreational drugs, legal or not, goes against the unspoken rules of being a public CEO. 
6. Reading into the Sep-18 quarter, Musk’s seemingly relaxed attitude implies the business is performing as planned, and results will likely be in line with guidance. Sep-18 would be the first quarter for Tesla to turn a profit. That said, given Musk’s unpredictable actions, investors won’t feel comfortable about profitability until the company delivers on 2-3 quarters in the black.
7. If Elon’s relaxed attitude is a short-term positive, it is at least balanced out by the departure of chief accounting officer Dave Morton as a potential long-term negative. While Morton reiterated that Tesla’s books are in order, any sort of C-level departure is a negative.

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