Another Blow Up For Tesla

Tesla had another blow up, this time it blew up earnings with EPS coming in at 12 cents above Wall Street estimates and 13 cents above Estimize estimates. Revenues were much higher as well. All this despite approximately 35% of the float sold short at the end of January, which likely accounts for the “pop”. Clearly, few analysts “get” this company, as there seems to be a lot of Wall Street folks mispricing their estimates. The new Model X is certainly closer to the $45k price range they want to get to, but current sales are averaging $107k – which means the estimates of most analysts don’t match up with the expected car sales going forward. This is always a problem with DCF analysis, and why it is only one of many things to look at when looking at an investment in this company.
 
Elon is great at saving news to keep pressure on the stock price through media manipulation.  This type of pressure makes the stock price much more volatile, and lends the pricing action to be heavily influenced by the emotions of the crowd.  Tesla’s battery gigafactory news was embargoed until next week. The NTHSB safety review wasn’t mentioned much, and Elon Musk won’t close the door on any acquisition from Apple (AAPL), or others, yet.
 
Despite Tesla’s media campaign driving pricing, the underlying product is a quality product, and the challenges around scaling are slowly being overcome. Litigation around selling practices are slowly being resolved, and there is no reason to expect that Tesla won’t be able to overcome issues related to the antiquated nature of the car selling business. Battery manufacturing is improving, price point is being addressed, and the underlying growth of the company is being fueled by solid revenue and customer growth. This is important as it means Tesla is a solid business (regardless of the valuation placed on the company by the public market).
 
So what can an investor look at for buying and selling shares? Current underlying value is likely closer to $120-140/share, but we don’t think that is what will drive trading prices. The market is reacting to the disruption from this company, and the measured media blitz that doesn’t seem to ever let up. For these reasons, we look to the Decision Support Engine to help guide our view of Tesla pricing over the next few months and years.



Tesla gapped to 220 after the bell on 2/20 after earnings the night before, but is only reaching 215 in the regular session. Both are into the resistance zone from 2/19.  Now, breaking 194 should confirm the rise off the Nov. low is complete, and 110 +/-15 is about to be visited in corrective support over the next several months.