Status of TSLA post earnings

There is always no lack of lovers and haters for TSLA at any given time, period! After reaching its all time highs around $500 (post splitting) early September, it has cooled down in the past few weeks till now. As I said recently, I don't think TSLA has a lot of upside in the near future but potentially with a huge downside risk.  I'm personally just doing a lot of short term (often weekly) swing trading for TSLA until its long term trend is firmly established. Yesterday, I opened a long position for TSLA for next week or two. 

Tesla (TSLA) reported earnings after the close Wednesday. My friend shared with me an analysis by the hedge fund manager, Glenn Tongue,  about the earnings. Again, Bulls and bears can take something from both angles. I thought many folks would be interested to learn something from it.  

Tesla reported third-quarter earnings yesterday that, as usual, provided support for both the bears and the bulls. As usual, the earnings call was a love-fest, with little substantial discussion.

Revenue of $8.8 billion was the company's best ever, as were bottom-line results of $0.27 per share in GAAP earnings ($0.76 non-GAAP). These results were driven by record deliveries of 139,583 units, somewhat offset by price reductions taken during the quarter.

One unusual expense item in the quarter was a non-cash accrual of $543 million for the compensation package for CEO Elon Musk, which to my knowledge is by far the most lucrative in history.

A somewhat offsetting unusual revenue item was the $397 million in regulatory credits.

The company's manufacturing footprint continues to expand, with the new plant in China continuing to lead the manufacturing ramp. Next year, Tesla intends to open two new manufacturing facilities located in Texas and Germany. Clearly Tesla believes that if they build it, they will come.

Bulls were happy with the results, as revenue and earnings beat expectations. This is the fifth quarter in a row the company reported positive earnings. The company also reaffirmed its 500,000 unit target for 2020 and announced battery innovations at its recent "battery day," which it believes will drive increased efficiency, reduced costs, and significantly enhanced profitability. Musk again promised that innovative solar products, an area that has been a black eye for years, are just around the corner.

Bears will pick apart many elements of the report. Without the regulatory credits, Tesla would have once again lost money in the quarter. The financials continue to have funny characteristics, such as earning only $6 million on its $15 billion cash balance – a suspiciously low amount, even in this interest rate environment.

As China continues to grow in importance, more of Tesla's consolidated capital will be siloed offshore, not available to U.S. shareholders. And bears continue to point to Standard & Poor's refusal to admit Tesla to its S&P 500 index, suggesting this is confirmation that S&P doesn't trust the company's financial reporting and/or future prospects.

Bottom line: Tesla continues to be a battleground stock. There is no doubt that it's growing much faster than other major automotive manufacturers and will almost certainly continue to do so for quite some time.

But with a market capitalization of approximately $400 billion, equal to more than 15 times trailing revenues, an awful lot of optimism is built into today's stock price.

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