What’s Cabot’s “Small Cap Medical Juggernaut?”

by Travis Johnson, Stock Gumshoe | June 10, 2016 6:20 pm

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Solving a teaser pitch for the Friday File, plus a checkin on some REITs

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6 years ago

Speaking of Tesla a friend sent me these comments from a newsletter writer:
Musk distracts investors by portraying Tesla as a technology company, not a car company. Don’t be fooled. Tesla is a car company. The auto industry is known for its slim operating and profit margins, even for luxury-car makers. BMW’s gross margins are only around 20% and its profit margins around 5%. Tesla’s gross margin is around 23%, and it isn’t even close to earning a profit.

The company has been losing money since its inception… $2.3 billion since 2007. Its free cash flows – cash profits after paying for capital expenditures – are even worse – negative $4.4 billion. Analysts expect Tesla to burn through another $1.4 billion of free cash this year.

Tesla tries to hide its horrible business by using nonstandard – or “non-GAAP” – accounting to draw investors’ attention away from its true financial condition. We wrote about this extensively in the last two issues when we recommended shorting Tesla.

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