Has Tesla turned?
That was the big question on Wall Street on Thursday as shares of the technology-forward automaker had their best day since 2013 following the company's third-quarter earnings release.
Experts are split, but some, including Jim Cramer, liked what they saw in the results that ignited the move.
Here's what they're saying:
Jim Cramer, host of CNBC's "Mad Money," said the conference call felt like it was that of a more traditional automaker:
"I've got to tell you: Ford sounded like Tesla, and Tesla sounded like Ford. Tesla was like listening to a call from a real company that made cars and made money. … It was seamless. How about China? The fastest to grow, to put up a factory and hire people. This was – I'm not saying it was subdued [CEO] Elon [Musk], but it was a guy who makes cars. I enjoy this kind of not-wise-guy Elon. … Now, people hate this. … You say something good about Tesla and people say, 'Hey, you said it was bad. You said something bad about Tesla and now you've got me caught in a short.' Look, the fact is that Tesla delivered a profit, but there are a lot of people who think it was still hocus pocus. I come back and say I look at that cash position, and I say you know what? … It was just a regular call. That's one of the reasons why the stock's [up] so much, because he wasn't on Twitter saying, 'This was the greatest quarter ever and I'm going to make 500,000 cars.' There was none of that. There wasn't. And the China thing? Look, it turns out that – by the way, like [PayPal CEO] Dan Schulman – if you work with the Chinese government, you can still do a tremendous amount of business."
Craig Irwin, senior research analyst at Roth Capital Partners, wasn't quite as bullish on Tesla's prospects:
"So, what I'm looking at is revenue is down [$]520 million year over year. Why is that? We have 10,000 fewer Model S and X cars this year versus last year. Pricing on the Model 3 is actually off about 20% year over year, and it looks like quicksand to me. So, we have to look at 2020 and ask: Are we going to see further deceleration? Are we going to see further probable price pressure on the Model 3? I think so. I think it's overdone at [$]300. [Host: And the Model Y isn't going to come save the story?] I'm a skeptic. I think it probably does end up cannibalizing the three in a very similar way to when we saw the X come in with the S."
Gene Munster, co-founder of Loup Ventures, said the report will refocus investors on the bull case for Tesla:
"This was a great quarter for them, and I reluctantly use the word 'great' because I think it's such an emotional stock one way or the other and I don't want to pick sides here. I want to stay straight and narrow down the road. And specifically what happened – and, in hindsight, they kind of told us that this would happen in their June letter, that they'd been recognizing some revenue from the deferred component. That is probably the biggest missing piece between that revenue fractional miss and the strong earnings, is that they have, call it, $880 million in deferred revenue. Last quarter, they said there was [$]567 million that would be recognized over the next year, but … the incremental piece that we learned from the letter that they just put out was that they still have nearly [$]500 million to recognize going forward. And so, what that probably means is a portion of this upside in earnings — maybe consider it a third or a half of it — was related to deferred, essentially 100% margin revenue that came from this full self-driving feature that they've been selling. So, the reason why that is an important factor in this, as we think about this quarter relative to the Tesla story, is that the deliveries have been moving in the right direction. I'm surprised that their guidance will call for … a record number [of vehicles] in the December quarter, but the earnings piece their ability to shave off this deferred income, makes it more easy for the company to essentially improve that earnings piece, which obviously has been one of the negatives around this story. And they can sustain that, that [$]570 million. They could take pieces of that over the next two years. And so, this whole idea that … we're one quarter away from things kind of collapsing, I think that story took a step back and the overall story took a step forward today."
Cathie Wood, a noted Tesla bull and the CEO of Ark Invest, which has a $4,000 long-term price target on the stock, said the short sellers were likely "covering" as the stock surged over 17%:
"I think … some of the shorts are covering. They're stretching to make a negative case now. They're trying to figure out, is there some accounting gimmickry here that has caused this upside surprise? And as we dig through the accounting and the numbers generally, if you look at the revenue growth year to date, 21%. Unit growth up 65% in an auto industry that is declining. We think total auto sales have peaked. So, this is quite dramatic, and I think the shorts are going to be forced to cover as time goes on."
New Street Research analyst Pierre Ferragu said the positive results were a reflection of Tesla's leadership in the auto space:
"I think nobody's close, to be honest. Tesla introduced into the market the Model S seven years ago, and today, in what manufacturers have on the road or have announced, nothing is matching the 2012 Tesla Model S. And the Model S of Tesla today is actually 40% better than seven years ago. So, that's how Tesla turned from being a disruptive innovator seven years ago to, actually, an industry leader. They have seven years of experience others don't have, and I don't think anyone is close to that."
