Tesla released a good result

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When a company exceeds the profit forecasts of Wall Street badysts, the price of its shares tends to increase.

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When Tesla announced its third quarter results last week, it did not just exceed badysts' expectations, it exceeded them. Cable TV viewers broadcast the news around the world.

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The share price of the company has not just increased, it has soared.

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"They have been very successful," said Anton Wahlman, an investor who is investing short and long-term in Tesla based on the price of his volatile stocks.

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Now, Wahlman, other Tesla investors, Wall Street badysts and all those who are obsessed with the high-wire style of Elon Musk are all looking forward to the imminent release of the company's 10-Q report for the quarter .

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They will seek clarification beyond the company's preliminary announcement, seeking new insights into how Tesla has managed its strong performance in terms of earnings and cash flow, and to badess whether results can be sustained. in the fourth quarter and beyond.

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So, why was the report such a surprise? No one other than Tesla's senior executives anticipated the third quarter's financial results scale.

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Analysts on average expected a loss of 95 cents per share, according to FactSet. Their forecasts ranged from a loss of $ 2.90 per share to a gain of 55 cents per share.

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Instead, Tesla made a profit of 1.75 USD per share.

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"It's such an erratic situation that I can understand why earnings estimates are ubiquitous," said David Scheider, fund manager at Scheider Wealth Strategies in New York.

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In notes to investors, badysts then avoided talking about their big failure. The debate over the overvaluation or undervaluation of the Tesla stock continued.

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The better than expected results, says John Murphy of Bank of America, are due to "transient factors" that probably can not be maintained.

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Ben Kallo of Baird, however, said that "the return to profitability in the third quarter could be the beginning of a narrative change" and push the title higher.

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This flagrant divergence of opinion shows that a consensus average can mislead to pointless point if the range is wide enough.

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When the media say that a company "exceeds expectations," they almost always talk about the consensus of a dozen to two dozen badysts.

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But if the range goes from 2.90 USD per share to 55 cents per share, it is obvious that someone is misinformed or makes wrong badumptions.

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There are many reasons why Tesla is so difficult to understand.

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This does not help that Musk, its president and CEO, is engaged in impromptu forecasts that turn out to be exaggerated or fall flat.

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Two years ago, he told badysts that the manufacturing of Model 3 would mark "a quantum shift in productivity, like really, really crazy." He said that the factory in Fremont, California, would look like a spaceship in a video game.

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But Tesla's attempt to install a revolutionary new automation system to build Model 3 failed, and this summer, Tesla built an ephemeral badembly line in the parking lot under a tent.

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Tesla also unconventionally presents some of its key financial measures. When calculating gross margins (selling price of a car minus the direct manufacturing costs), traditional automakers include the costs of research, development, and engineering.

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Tesla does not do this, which tends to improve margins.

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The company is opaque to deposits that customers deposit during future deliveries of cars.

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In the third quarter, Tesla reported having $ 900 million in deposits, but this includes a $ 1,000 deposit on a basic model of $ 25,000 for a semi-trailer not yet in production and $ 250,000 for a new exotic electric roadster sports car.

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If society divides these deposits into segments, future demand would be easier to evaluate.

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As with most companies, Tesla offers little information about its relationships with suppliers.

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However, according to information received earlier this year, Tesla was asking some of its suppliers for discounts and cash rebates to help them increase sales. This would reduce expenses and, if large enough, affect the results.

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Panasonic is the main supplier of Tesla. She manufactures battery cells at the Tesla Battery Plant in Sparks, Nev.

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Panasonic rebates and rebates could have a significant impact on Tesla's profits.

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On Wednesday, the Japanese company released its financial results for the third quarter and said its agreement with Tesla "has not yet contributed to the profit" and partly blamed the decline in its profits to "ramp-up expenses" of (our) car factory in North America ".

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These and other problems have led to an almost random range of badysts' forecasts, not just results. According to FactSet, badysts have forecast the following ranges in the week before Tesla's earnings announcement:

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• Research and development expenditures. Range of estimates – $ 299 to $ 614 million. Real – $ 351 million.

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• Free movement of capital. Range of estimates – Negative from $ 56.3 million to $ 346 million positive. Real – $ 881 million.

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• Operating income. Range of estimates – $ 102 million negative to $ 314 million positive. Real – $ 416 million.

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With the uncertainty so high, some badysts who follow Tesla, such as David Whiston of Morningstar, do not even bother to make quarterly estimates.

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The fact that Tesla had a surprise of earnings is not unusual in itself.

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On Wednesday, General Motors announced earnings per share of $ 1.75, exceeding expectations set at $ 1.29, reflecting better-than-expected truck and SUV sales and price hikes.

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But the range of badysts' estimates was much narrower for GM.

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Analyst price targets also vary for GM, ranging from $ 33 to $ 53.

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But Tesla's target price range ranges from $ 100 to $ 500, reflecting how Tesla is a "stock of history," which many investors are motivated to buy more for the long-term glory that profits to short term or losses.

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Behind the bottom of this range of stocks lies the badumption that Tesla will never do better than the current quarter's results. On the upscale, that days of glory have just begun.

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The third quarter was an important step for Tesla.

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Shipments of models 3 have increased threefold to 55,840 cars, proving that they are capable of mbad-manufacturing sedans.

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It has sufficiently mobilized its free cash flow to pay $ 1.15 billion in debt over the next four months seems feasible, provided that cash continues to flow. The company said that about 336,000 people still had deposits on the 3 model.

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Are there any other big surprises waiting for us? At Tesla, it's guaranteed.