Wonder no more. Good ole Anton Wahlman has weighed in. Rather, he stuck his foot in his mouth yet again. What he does in this "analysis" is to compare 3Q 2019 to 3Q 2018. You can bet he'll do it again in January. Never mind the news that G3 is going on line momentarily, that MY will start rolling off the assembly line next year and start picking up steam next Summer. Or that the long awaited Tesla Cybertruck debuts in about a month. Or that the company is finalizing G4's location in Europe, the site will be announced soon. Or that Tesla made impressive strides in reducing production costs @ Fremont. Nah, none of that matters. What matters is TSLA did not beat the 2nd best quarter in its history Y over Y in profit -- conveniently forgetting that during the last months that the $7,500 tax credit would be available or that Tesla was rushing to fill backorders dating back two years. Or that the M3 is now around the #6 selling luxury car of any kind in the USA. He actually put up a post a few days ago pointing out that September deliveries were 97% lower in Norway than in April proving M3 demand is petering out; never mind here that anyone who knows anything about Tesla understands that the last month of a quarter that most all deliveries are shifted to the U.S. in the quarterly crunch. Or that Tesla delivered more cars in Q319 than ever before. That Tesla's sales are up 65% this year while the rest of the industry's sales are DECLINING. (The only negative for Tesla is that MS/MX sales are down a bit and we all know the why there).
This guy makes Nietsche a Pollyanna in comparison.
Oh, and this guy proudly announces he's short TSLA and long Ford. Say what? Snicker, snicker.
One famous company just reported negative growth on a year-over-year basis, September 2019 quarter vs. September 2018.
Revenue was down 6%, gross profit down 22%, operating income down 37%, and net income attributable to shareholders down 54%.
You would think this was Blockbuster video rental or a funeral home losing business to cremations, right?
You would be wrong. It’s Tesla.
And because the margin expectations were even lower, the immediate stock reaction was up 20%. But that does set the bar so much higher for Q4 and Q1.
This idea was discussed in more depth with members of my private investing community, Auto/Mobility Investors. Get started today »
NOTE: A version of this article was first published on Oct. 23, 2019, on my Seeking Alpha Marketplace site.
One publicly traded company just reported a set of September 2019 quarter financials that were down on all relevant metrics, compared to one year prior (September 2018):
Revenue: Down 6%
Gross Profit: Down 22%
Operating Income: Down 37%
Net income: Down 54%
(That's net income attributable to stockholders, the most bottom of lines.)
So, on every conceivable metric, this company is shrinking revenue and profits. Whatever it is, it's not a growth company. Can you imagine the reaction to any other company with these year-over-year declines?
These negative growth rates up and down the income statement are perhaps what you would expect from Blockbuster video rentals or a funeral home in a world in which more and more people are cremated.
Adding insult to injury, of the $143 million in net profit, $107 million were government subsidies ("Regulatory Credits"). Talk about having almost all of your tiny and shrinking profit being dependent on politicians taxing your fellow man in order to pick winners and losers!
Yet, when these catastrophic year-over-year financials were reported, the immediate reaction of the stock was to rise 20%. The company in question is of course Tesla (TSLA) and the financials can be found printed onto the company's income statement filed at Investors Overview | Tesla, Inc.
So how come a 6% revenue decline and net income decline of 54% resulted in an immediate 20% stock jump? Shouldn't it have been the other way around?
No, not in this case. In this particular case, a rise in stock price was exactly what should have been expected for these results. Why?
Because the Wall Street expectations were even lower, that's why. In particular, below the revenue line. The 6% revenue decline was approximately in line with consensus. The $143 million profit was not. The Street was expecting a loss. Flipping a modest loss to a tiny $143 million profit, in part helped by a $107 million government subsidy ("regulatory credit") changed the whole game, at least in the short term, as far as the stock was concerned.
As you can see in the table above, there are no meaningful positive trends almost anywhere in the income statement. Yes, other income was up, and the opex lines came down more than revenue, but that didn't help the net results below the line.
Implications for the next two quarters
The positive reaction to the Q3 numbers sets the bar higher for Q4 and Q1. Investors will soon see in the 10-Q filing some of the methods by which the margins weren't as bad as the street consensus had indicated. Especially without a return to growth in Q4, if that is what happens, it will be all that much more difficult to repeat this immediate stock reaction next quarter, as well as the one after that.
Here's the link if you want to see Anton show his keister in all its glory. https://seekingalpha.com/article/4298583-going-believe-teslas-negative-g...