Tesla Is Buying More Time by Making Fake Promises

Tesla (TSLA) reported its Q2 earnings yesterday and missed the estimates by a large margin on both revenue and earnings. Tesla’s Q2 EPS of -$1.06 missed the analysts estimates by $0.54. On the revenue front, Tesla reported a jump of 30% year over year with the sales coming in at $1.56 billion, falling short of the consensus by $60 million.

Despite the terrible report, Tesla is flat in afterhours trading. The reason why Tesla didn’t plunge after earnings is probably that the company said it expects to deliver about 50,000 cars in the second half of 2016 after delivering 29,192 in the first six months.
Even if Tesla manages to deliver on its goal of 50,000 cars in the second half of 2016, it will still be less than the low-end of its February guidance of 80,000-90,000 vehicles.

However, Tesla delivering 50,000 vehicles in the second half is a pipe dream as the company will find it very difficult to ramp up its production considerably to meet the target. I expect the company to miss the guidance by a huge margin. The company is only buying more time by saying that it is on track to deliver 50,000 vehicles in the second half of 2016 and once investors realize that the given target is unachievable for Tesla, the stock will tank.

Given that so many executives have been fleeing from Tesla, it is highly likely that Tesla’s days of trading at such irrational multiples are coming to an end. Although Tesla has been able to buy more time for now, it will not be able to do so in future, especially after the acquisition of SolarCity.

On GAAP basis, Tesla is already losing over $2 per share and the acquisition of SolarCity will make the situation a lot worse for Tesla. Adding SolarCity’s debt and losses to Tesla does not seem like a good idea to many people and it will prove to be disastrous for Tesla in the short and long-term.


Tesla has been trying very hard to delay its inevitable crash and has managed to buy more time…for now. However, the chances of Tesla failing to deliver on its 50,000 guidance are very high and the stock will eventually crash once the failure is confirmed.

Tesla is putting lipstick on a pig by cooking its balance sheet, which shows the dire desperation of the company to buy more time. For instance, the company added cash from Model 3 reservation to its cash flow, which shows the desperation of the company. Thus, I think longs should be cautious going forward.
Published on Aug 4, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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