Is Tesla Fooling Investors by Manipulating Financials?

Tesla’s (TSLA) Model 3 bookings may have been very overwhelming, but the EV maker is losing money at a very fast pace. Tesla loses a lot more money than it generates, and with the company expected to report its quarterly report tomorrow, I think investors should be cautious of the stock ahead of earnings.

Financial manipulations

The last time Tesla reported its earnings, Zero Hedge published an excellent article highlighting how Tesla manipulates its quarterly report so as to please the market. Zero Hedge pointed out that the difference between Tesla’s non-GAAP and GAAP revenue was almost 40%.

Also, the company stopped disclosing its free cash flow, which is very hard to manipulate and instead introduced a new metric in the latest newsletter called core operational cash flow.
The difference between Tesla’s free cash flow and core operational cash flow was huge in the latest reported quarter.

Core operational cash flow greatly overestimates Tesla’s cash generating power as the difference between core operational cash flow and free cash flow was huge in the last reported quarter as well.

Upcoming quarter

It is obvious that the demand for Tesla’s products is always strong. As evident by the Model 3 bookings, Tesla will continue witnessing strong revenue growth. However, the company is making huge losses and with the Model 3 priced at half the price of the cars Tesla currently sells, Tesla’s margins should fall further in the coming years. Long-term investors should focus on Tesla’s cash generating power and should ignore the revenue growth.

Irrespective of how Tesla performs tomorrow, I am bearish on the stock in the long-run. Tesla as is has struggled to meet the demand and with Model 3 bookings soaring, I think Tesla will again fail to meet the demand.

Tesla manipulating its financials is a clear indication of the fact that the company doesn’t want retail investors to know its actual cash generating power, which is reason enough for me to stay away from the stock.


Given the financial manipulation, I wouldn’t be surprised if Tesla delivers on the analysts’ estimates yet again. However, despite how Tesla performs in the quarter, I think investors should stay away from the stock for the time being. With the Model 3 hitting the market in the future, Tesla’s margins will fall drastically. And given that Tesla is already losing a lot of money, a further increase in losses can be disastrous for the stock.



Published on May 3, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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