Tesla Stock was a victim of gains, but this bear is not convinced

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(TSLA), surprise, third-quarter earnings pleased bullish investors. But some skeptics are still unconvinced, and one in particular is trying to break through the optimistic story of CEO Elon Musk about the company. Tesla was down 1.5% Monday afternoon at $ 341.27.

UBS analyst Colin Langan, who is quoted on the stock and has a price target of $ 190, released a report Monday questioning the strength of Tesla's third quarter report. Langan reviewed Tesla's 10-Q report, a quarterly report containing more information than Tesla's press release when it announced its results on Oct. 24. He says that shows that Tesla received "unexpected help".

Tesla's revenues were boosted by a relative decrease in the company's guarantee provision – the amount the company sets aside to satisfy its guarantee claims – and by significant government credits that were not initially explained in its report. press release, writes Langan.

The Company recorded $ 188 million of warranty provisions during the quarter and Langan calculated that the average vehicle provision decreased to approximately $ 2,200 from $ 2,900 in the prior quarter. According to Langan, this difference generated about $ 55 million, or 31 cents per share, in Tesla's results. Tesla reported earnings per share of $ 2.90.

Tesla bear asks about earnings strength in the last quarter

However, the company disputed this finding, noting that solar products and energy storage products were also part of the total number of warranty provisions, making Langan's calculation per vehicle inaccurate. In addition, a Tesla spokesperson wrote in an email to Barron The warranty provision is lower on Model 3, which accounts for 68 percent of Tesla's third quarter shipments compared to the company's more expensive models. In the second quarter, Model 3 accounted for less than 50% of deliveries. Because of this move to cheaper cars, warranty expenses would invariably be lower.

Langan also noted that Tesla's results were boosted by substantial government credits, which were not all detailed in the company's initial press release. Tesla accounts for the money generated by ZEV (Zero Emission Value) credits, a public program to encourage automakers to make electric cars. He can sell these credits to other automakers who manufacture fewer electric vehicles. But the company does not count all these types of credits in its earnings publications. Langan calculated that Tesla earned 77 cents per share on these other credits, which is a considerable part of his total profit. These unexpected benefits underscore that "the underlyings were not as strong as the initial version suggests and reinforce our confidence that fourth quarter results will decline despite higher volumes," he said. -he writes.

In response, the company spokesman wrote that the company has no regulatory or accounting obligation to include the credits, and that they are all included in the 10-Q. Most vehicle credits follow vehicle deliveries, he noted. ZEV credits are mentioned in the press release only because they tend to be volatile.