Today
Tesla released production and delivery data for Q3 18 that met its targets and signals that Tesla is on track for becoming a consistently profitable company with sufficient internal cash flow generated to meet its current obligations. Why then did the stock price go down today instead of up?
First, let's look at the numbers:
Production:
80,142 vehicles with 53,239 Model 3s and 26,903 S&X
Deliveries:
83,500 vehicles with 55,840 Model 3s, 14,470 Model S and 13,190 Model X
If you
plug these numbers into a reasonable spreadsheet model such as the one luvb2b has put together and you assume that a reasonable number of ZEV credits were sold during the quarter, you arrive at the following projected results for Q3:
GAAP Earnings per share: $ 0.33
Non-GAAP Diluted Earnings per share: $1.43
Net change in Cash: $721,161,000
Nobody gets a spreadsheet model exactly right, so we'll cut luvb2b some slack when the final numbers come out in November, but you can see that it looks like Tesla did what they set out to do in Q3: show a small GAAP profit and generate a ton of cash that will be needed in paying down debt in early 2019. The GAAP profit calculation is close enough to the break-even number, however, so that Tesla did the conservative thing and didn't declare profitability at the time of the P&D report. The lack of reiterating Tesla's earlier profitable and cash flow positive mantra in the report is the reason, I believe, that the market didn't resist too hard when the shorts started walking down the SP shortly after a green opening. Also, the information about headwinds in China did not help. The difficulties with the tariffs in China was likely intended to have some positive implications such as Tesla doing so well in Q3 DESPITE the China headwinds and Tesla seeing the need to accelerate creation of the China factory. Casual readers see China issues and react with a negative, unfortunately.
Let's look at the specifics of the day's trading. TSLA topped out at 317 in pre-market trading shortly after the P&D news was released. Price exceeded 315 shortly into market hours, but the shorts figured the weakness of no reiteration of profits in the report was enough for them to work with and they sold the SP down to 304 by 10:10am. Buyers bid the SP back up and there was a level cap at 316 for about 10 minutes as shorts sold what was necessary to cap, then they push down but buyers again started bidding the SP back up. After 11:55am TSLA started a slow descent, which accelerated after 3:00pm. The SP bottomed at 3:25pm and recovered some into the close.
If Tesla had included a reiteration of profit and FCF+ in their P&D report today, I think the shorts still would have tried to control the SP and push it into the red, but they would have lost control in the morning and the SP would have climbed well into the green in afternoon. I expressed such a concern yesterday regarding the need for the wording, but I understand with the SEC scrutiny upon Tesla, Musk and company didn't want to claim profitability and then find out in a few days they they missed it by a sliver. The good news is that bullish analysts such as Ben Kallo should be plugging the production and delivery numbers into their models and sharing the results with their clients, who are busy buying in after-hours trading. Don't believe me? Look at the final hour of trading in the chart above. That's a better than $3 improvement. After the top clients get a chance to buy, analysts will share their findings with the public and things get positive at that point.
I'm expecting a better day tomorrow, judging by the late after-hours trading. You and I might just be a day ahead of the market. It happens sometimes.
Shorts did 57.45% of TSLA selling today, up a bit from yesterday
Conditions:
* Dow up 123 (0.46%)
* NASDAQ down 38 (0.47%)
* TSLA 301.02, down 9.68 (3.12%)
* TSLA volume 11.6M shares
* Oil 75.18, down 0.05 (0.07%)
* Percent of TSLA selling by shorts: 57.45%
