TSLA Will Announce Earnings Today – Here’s My Prediction

Last week, while the media were wringing their hands over fake news, the Dow Jones Industrial Average jumped another 354.68 points or 1.7% to close at a record 20,624.05, hitting seven straight days of record highs. The S&P 500 popped 1.5% to a record 2351.15 and the Nasdaq Composite Index gained 1.8% to a record 5838.58.  While Trump’s opponents may fear for the future of the Republic, they would do better to fear for the future of their 401ks because this rally is running on fumes.

The truth is that markets thrive on investors’ stupidity and we are seeing a perfect example of that today while markets rally on nothing more than hot air.  Believe me, I thought the market would rise after Mr. Trump was elected; the opportunity to rid the country of 8 years of anti-growth policies was a game-changer that promised good things in the future.  But that doesn’t mean that investors should be discounting a decade of growth and two terms of promises, many of which will not be kept, in a one month period.

The market is well ahead of itself and poised to correct.  Sentiment and other warning indicators are flashing red.  Investors chasing stocks at these levels are taking big risks. And one of the biggest risks is Tesla Inc. (NASDAQ:TSLA), which plans to announce earnings after close today.

Here’s what I expect will happen…

TSLA Can’t Expect Anything But Bad News – Here’s Why

The nausea factor has risen so high for those of us who have lived through earlier bubbles and know how this is going to end that all of the Dramamine in the world isn’t going to settle our stomachs.  When you see the type of near-parabolic market moves we saw recently – seven straight days of record highs – it feels like we are partying like 1999 except Prince is dead and that party ended with one of the worst market crashes in recent history.  Naturally, these moves are accompanied by epic levels of smugness by what I call the country club crowd, by whom I mean the amateur investors who know nothing but think they know everything simply because the value of their retirement account statements has risen (and whose after-tax value, by the way, is much lower than they think, but that’s a story for another day).  These are the same know-nothings who weep the moment their accounts are down a couple of percent and blame their brokers (er, excuse me, their “wealth managers”) for putting them in such “risky stuff.”

These are the same amateur investors who have bid up TSLA, one of my least favorite stocks, to sky-high valuations. Unfortunately for them, the party isn’t going to last forever.

Today after market close, TSLA is due to report earnings, which in this case means it is going to report a loss unless one of two things happens: it cooks the books like it did last quarter, or God came down from heaven and bought thousands of its cars last quarter.

TSLA is the brainchild of the PT Barnum of our age, Elon Musk.  But PT Barnum, as far as I know, didn’t flout the securities laws or break virtually every promise he made, and he did provide a real live circus as advertised.  Mr. Musk only provides a fraction of what he promises while claiming every excuse in the book for his failures and engaging in every accounting trick in the book to try to cover his tracks.  And then for good measure he decided to bail out another money-losing company he owned, Solar City (SCTY), adding hundreds of millions of dollars of losses to Tesla’s bleeding balance sheet.

Investors ignored all of these facts to bid the stock to a recent high of $280.98 after the company opened its empty Gigafactory in Buffalo (a development that made me physically ill). We already hear from Goldman Sachs that Tesla missed its fourth quarter delivery target, we know that it pumped up last quarter’s earnings with the last California tax credits it was eligible for and by stretching payables by hundreds of millions of dollars, so Mr. Musk will have to pull new rabbits out of his hat to put lipstick on this quarter’s pig of an earnings report.  I can’t wait to see how Wall Street’s sycophantic analysts and the heavy breathers at CNBC explain away the bad news next week – no doubt they will blame Mr. Trump and the Russians!

The company’s cheerleaders (i.e. large shareholders) are working overtime to pump up the stock.  Highly respected investor Ron Baron recently said he expects to make four times his money on the stock (from current prices) by 2020.  With due respect to Mr. Baron, that statement is not only delusional but completely irresponsible from a man who is widely respected by individual investors.  Unless Mr. Baron is using options (and he gave no indication he was), the odds of Tesla stock rising to $1100 a share by 2020 is zero.  If Mr. Baron wants to make claims like that, he should share his research because he is the type of investor that others follow and he is putting other people at risk with his hyperbole.

I expect Tesla to announce a large loss accompanied by the usual unverifiable production goals and other promises.  Investors with brains will sell the stock and those who want to behave like Fox Mulder in The X-Files and want to believe will continue to behave like members of a cult. But they should remember what Groucho Marx said – they should not want to be members of any club (or cult) that wants to have them as a member.  Anyone with a functioning cerebellum can see that buying Tesla stock is a mistake from a hundred miles away.  As I tell people, keep the car and sell the stock.  (As I recommended in an earlier issue of Sure Money, investors should buy TSLA January 2018 $100 puts (TSLA180119P00100000).)

And make sure your cerebellum is functioning whenever you invest in stocks. Right now, too many people have checked their brains at the door.

Sincerely,
Michael

31 Responses to “TSLA Will Announce Earnings Today – Here’s My Prediction”

  1. Michael,
    I couldn’t agree more about TSLA. If there was ever a cult stock, this is it. Musk is a circus clown who has mesmerized the retail shareholders with his promises of the future and they, lemming like, are all in with his vision. If you disagree with them, you are ridiculed as being ‘old fashioned’ and ‘having no vision’. Well, my investing vision is fine and I will not be the one left holding the baby when everybody suddenly realizes that companies cannot continue to exist with out PROFITS not continuing capital raises. This one will eventually go down in the history books alongside Enron on how NOT to invest!

  2. Agreed on Tsla but is it really necessary to pepper sound financial insight with childish political tripe? Putin is not some kind of a joke- just wait until he unleashes his KGB scum sacks on the U.S .financial system. Overvalued Tsla stock will be the least of your worries! American sovereignty always. Stick to what you know and are good at, stick to finance.

  3. Spot on! Elon Musk must have the greatest powers in the world to fool so many people “airheads” into believing anything that comes out of his mouth. He’d be, as those who are purchasing his Tesla automobiles, to buy a the new “Wind Car”…I just invented this “free power” vehicle…a car with a small wind turbine on the roof to generate power…and have Elon on the trunk, talking into the blades, thus generating enough wind power to propel the vehicle for the life of Elon…what a great idea!

  4. Musk would have made an excellent tulip salesman, and would have built the biggest indoor tulip hothouse so he could also raise them in the winter. Ev Then he would have designed the world’s best hothouse, too. You know you are right; only a matter of time.

  5. Good day from the UK. Those of us that are the brexiteers (we want out of Europe.) we don’t see any future in the Union, it’s not about a dislike of
    The citizens of those member countries. The main problem for us is the total lack of control on immigration, we don’t disapprove of immigration just
    That the UK cannot afford the benefits that the UK provides to its citizens. It’s a system that is out of date in today’s world. The cradle to grave system was set up after the Second World War. At that time the U.K. Was in a desperate state. If America hadn’t come to our aid we would all be slaves to Germany.
    Immigrants coming to the UK are claiming Benefits from day one. Some living in expensive homes in London (because they have a lot of children)
    Some don’t work, why would they? Money for nothing and your house is free. The entertainment industry known as the “Lovies” don’t have a problem
    With open borders, they don’t finance it they are rich, hence the war on Lovies. I thought America should understand our current crisis. Nigel Farage, was the great gentleman that is responsible for championing our cause.
    Getting back to finances, the unprecedented position the financial world is in at the moment is beyond belief.
    The only guidance I take is yours, via your, sure money .com . I have followed various avenues over the past seven years.
    For me investing directly into America is one more difficult move. Your wisdom obviously comes from an American perspective.
    But I can still gain an advantage compared with the UK media or so called financial advisers.
    One question, where do you think Deutche Bank is at the moment? When would you expect the sh.t to hit the fan?
    Of course when the day comes Europe will crash big time, Angela Merkel has been busy trying to protect this crisis
    Without breaking the E,Union rules, but how can she ? She has reminded other EU countries that government intervention
    Is not allowed. Surely this Bank has got to hit the skids any day soon.

  6. CEREBELLUM? The “hind” brain? Cerebral cortex, the “top” part of the brain, the part that separates us from lower mammals. I wonder what you intended to write. I have lost a fair share of money trying to profit from the extinction of TSLA. When will people wake up so I can stop loosing money on your dire forecasts ( which I do wholeheartedly accept)?

  7. The biggest problem I see for reality to kick in is the fact that so many brokers have an interest in making sure that TSLA survive for as long as possible while they unload themselves.
    Their dishonesty in continuing to recommend the stock is almost criminal. They will suck in a lot more naysayers before they then turnaround and shoot the turkey. We may not be giving them enough time to come to that reality point.
    Maybe we should also be selling Jan 2019 Puts? That way we better cover the inevitable but give the brokers and their ilk more time to implode.

  8. It looks to me like Tesla think they are too big to fail, maybe the nature of the business (electric cars saving the world) will keep it afloat longer than
    Would normally be expected. The followers will only hear the good news, the bad news “must be a minor blip”. As Michael has revealed the sh. T hit the fan
    A long time ago, I’m sure like any other business Musk will milk it all the way to Armageddon.

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