
How You Could Have Predicted Tesla's Rally Even After Earnings Miss
You don't often see stocks going up after a miss on earnings, but something like this happened with Tesla Motors (TSLA) - Get Report .
The company reported its earnings and missed on revenue for last quarter. This was surprising to many after the company reported solid performance throughout the quarter and also launched its most awaited SUV, Model X. But if you are a quantitative investor and not a fundamental analyst for Tesla Motors, you have more surprises in store for you. In spite of this earnings miss, the stock price shot up over 11% after the miss and continues to be in the "green zone" for the day. This is on a day when the market is not doing so good.
Surprising, no? Well, there is, however, a way you could have seen this coming.
Social Market Analytics, the firm I work for, derives actionable intelligence using a patented filtering process to scan social media sources for relevant information generated by qualified accounts. SMA produces a family of metrics or "S-Factors" which provide traders and investors the full context of social media conversations around securities, commodities and foreign exchange. The primary metric, the "S-Score", measures how positive or negative the conversation about a security is when compared to what has been observed as "normal" conversation. An S-Score of greater than 2 or less than -2 indicates the conversation is more positive or negative than 95% of prior conversations. Historical results show that stock prices tend to move with social media sentiment direction: with high positive S-Score, equity prices move higher, those with low negative S-Scores move lower.
If you were paying attention, you would have noticed that the social media sentiment about TSLA was positive the whole day yesterday and continued to be positive throughout, and even after the earnings call. If anything, it became even more positive, and got in the "significant S-Score" range indicating that investors continue to believe that the Tesla Motors is still a good investment.
CEO Elon Musk has great plans for Tesla and people believe that he will be able to meet expectations. The faith people have put in him is evident from the strong positive sentiment indicators. Twitter was full of "negative" sentiment mood words post the earnings report, but the "positive" comments from the professional and credible sources offset this negativity around Tesla and generated enough buzz to make this sentiment positive. Social media sentiment has predictive power over price changes, much more than one would imagine.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.









