Tesla's (TSLA) Cash Burn to Worsen Before the Pain Subsides

Tesla (Nasdaq: TSLA) shares are lower amid a bit of cautious commentary on the name out Tuesday.

The WSJ took at look at Tesla's vehicle production plans (500,000 per year by 2018 and 1 million by 2020) and noted that the company also scrapped its promise to be cash-flow positive in 2016. Cash burn is also expected to be higher; up to $2.25 billion this year, from a forecast of $1.5 billion in February.

Cash burn is going to worsen before it get better, in other words.

The author also noted Tesla's rich valuation, with shares trading at about 75 times FY17 earnings estimates. That prices in a perfect execution plan, something Tesla isn't exactly known for. Just two years ago, CEO Elon Musk expected production to be at 100,000 units per year by 2015, a mark the company failed to meet.

But, Tesla is more than likely going to be able to raise additional funds given the still-easy borrowing environment and reservations for over 400,000 Model 3s.

Shares of Tesla are down over 1 percent at midday.

You May Also Be Interested In

• Tesla (TSLA) pivoting back towards cheap EV cars 'raises more questions' - Deutsche Bank
• Active options: TSLA META NVDA MSFT AMZN GOOGL AAPL AMD SNAP
• Tesla (TSLA) to Accelerate Launch of More Affordable Models