Even more obscure than Nikola Tesla is Tesla Motors' quarterly profit, which has received tremendous attention lately. Reuters reported adjusted earnings of 12 cents per share, or about $14 million, from $562 million in sales. Business Insider's Sam Ro wrote, "In other words, the market has concluded that Tesla is the real thing." Fantastic news for sure, and faster than you can say "zero to 60 in 4.2 seconds," the price of the stock jumped 50%. Am I the only one who read the quarterly report? Because it doesn't appear that Tesla is making money, at least from automobile manufacturing. The reaction of the stock is a different story altogether.
I recently wrote Slow Down Tesla, Curves Ahead, an article pointing out that short interest is positively charged at more than 45% of the float. For those of us with investor high mileage (and the gray hairs to go along with it), the first thought to come to mind is "short squeeze". At a certain point, it doesn't make one iota of a difference why a stock is trading higher, short-sellers have a limited amount of pain tolerance and once that point is reached, the short position needs to be covered. Once you have enough short interest in a stock, it's like a stick of dynamite. All it takes to light the fuse is a positive news event and the wheels are set in motion.
As an automobile manufacturer, Telsa isn't profitable yet, and the company stated that it doesn't expect to report a profit in the upcoming earnings release. Investors may receive a surprise beat, but otherwise they will have to remain patient. So why did Tesla report a paper profit? Because of accounting rules and nonsustainable government money. Items included: California zero emission credits (see this Bloomberg article): $68 million Federal/other credits: $17.1 million We can go on, but I covered much of it in my previously mentioned article last week. Besides, the zero emission credits more than offset the profit. If you haven't read yet, the California Zero Emission Vehicle Program credits are a result of a mind-numbing California law that results in other automobile manufacturers, including Ford ( F) and GM ( GM), paying Tesla so they can sell vehicles in California. The payments come from somewhere, and not from GM or Ford. The payments made by GM and Ford come from increased prices paid by consumers. TSLA Revenue Quarterly data by YCharts
About half of the cars that Tesla makes are sold in California, and each one results in uber-government subsidies.