
Tesla Smashes Earnings And Revenue Expectations - Pasanpr
http://www.businessinsider.com/tesla-q1-earnings-2013-5
======
mikeyouse
A good article to help understand the massive afterhours movement:
[http://www.reuters.com/article/2013/05/08/autos-tesla-
idUSL2...](http://www.reuters.com/article/2013/05/08/autos-tesla-
idUSL2N0DO2IH20130508)

High-Level Summary:

There was a ton of short-selling interest on TSLA (due to expectations of a
big earnings miss). Almost 27% of the 115mm shares outstanding are currently
being borrowed by short sellers. TSLA has more short interest by percentage
than 98% of US stocks. Everyone was really expecting the price to go down.

Tesla reported earnings today at $.12/share, and upped their forward guidance.
The consensus earnings estimates were $.04/share, so TSLA greatly surpassed
expectations.

To short a stock, you have to borrow a share from someone else, and then
return that stock to them at a later date. Returning the stock is called
'Covering a short'. All those people who were betting against TSLA are now
forced to pile back into the market to cover, but since so many shares were
short to begin with, the number of people who have stock to sell is much lower
than typical.

This results in a 'short covering rally' where there is a lot of demand to buy
shares and a small supply. Econ. 101 takes over and you see a big spike in the
price.

~~~
ncavig
This might be a stupid question, but as a Tesla stock owner, and (becoming
more apparent ever day) naive investor, how do you find out this information
and/or digest it so well? I'm mainly a google finance guy and had no idea so
much of the stock was being shorted.

~~~
damoncali
Forgive the unsolicited advice, but I think that's the wrong question. First
ask yourself what you'd do with that information. Then think long and hard
about indexing your money.

Read up on portfolio theory and you will see that it's incredibly difficult
(some say impossible) to beat the risk adjusted return of the market (at least
not on purpose). It turns out if you are not in many stocks - 40+ (the exact
number depends on who you ask), then you are taking more risk than you are
being compensated for.

~~~
ncavig
FWIW I do have a strong majority of portfolio dedicated to index funds, and
have automatic investing set up for those funds biweekly. But there do come
times where I see a company, and after some due diligence I do see as a
company I believe in and see prospering in the long. Tesla is one of those
companies so I bought a fair amount 2 months ago.

Regardless of solicited or not, I do agree with your advice and if nothing
else, hopefully readers who fear to ask such questions gain from friendly
advice such as yours

EDIT: grammar

~~~
Shebanator
I do the same thing in my IRA. Right now TSLA is the only individual stock I
own, and it is a bit less than 10% of my account value. I bought it at $29 per
share 9 months ago or so, knowing I might take a bath, but I believed in the
company's long term business model then and I still do. I feel that this kind
of investing minimizes the risk factor.

------
3am
A couple of interesting statistics about stocks that are easily available are
related to how many people are shorting it (ie, someone borrows a share, sells
it, and makes a profit if they can re-buy it at a later date to close the
short position).

In the case of TSLA the stock, as of Apr 15, almost 31 million shares were
lent out to short sellers ("sold short"). That is out of 72 million shares on
the market ("float"). At an average volume of 3 million shares traded per day
(trailing 3 month average) it would take more that 10 trading days of nothing
but short sellers buying shares on the open market to return to the people
they borrowed them from ("cover").

Short trading unhedged is regarded as dangerous for this reason. If you buy a
stock in the traditional way, if it goes to zero you only lose your
investment. If you sell a share short, your losses (amount you have to re-buy
it for minus the price you sold it for) is unbounded. Typically, this isn't
collateralized by cash, but in money that brokers loan to traders ("margin").
If a broker sees that I have a really, really big loss on a short position,
they might make me repay that money ("issue a margin call")... and depending
on the situation, that might force a trader to cover their short position.

Anyway, point is that this can lead to a bunch of short sellers driving up the
price of a heavily short stock all at once because they've either decided to
cut their losses or because of margin calls, called a "short squeeze". This
usually isn't sustainable because it's a temporary supply/demand imbalance.
Could be an tough day for a lot of people investing against Tesla tomorrow,
but I wouldn't bet on the gains in TSLA the stock tomorrow/in after-hours
trading lasting for a long time.

~~~
enraged_camel
The most amazing thing about your post is that 95% of your post went right
over my head. And I consider myself a fairly intelligent person. :P

(There's probably some interesting commentary in there somewhere about the
complexity of financial markets and how it is probably bad for society to have
a vast portion of our economic growth riding on something most people don't
get.)

~~~
count
Here's the gist, in simplified terms. I assume you understand what stock and
stock brokers are...

You can 'short' a stock that you think is going to lose value (e.g. you expect
a major earnings miss to be reported).

Shorting a stock means you borrow a share from (generally) your broker at
todays price. You then sell that share to someone else for market price. At a
determined date, you have to buy another share at market rate and give it back
to your broker (this is called 'covering' your short).

If you bet right, you borrowed a share, and sold it for $N. Then, at a future
date, when the price fell, you bought for $N-X, and gave the share back to
your broker. You just made $X, the price difference from the value of the
stock falling.

If you bet incorrectly, you borrowed a share, and sold it for $N. Then, at the
future date, the price is actually higher, and you have to buy a share at
$N+X, AND give the share back to your broker. You just lost $X, the price
difference from the value of the stock rising.

If you bet REALLY wrong, the $+X factor can get really high - your broker may
'call' and force you to give them cash, pending your future purchase of the
share to return (your 'cover').

Now, to MOST people, shares are effectively unlimited - with tens of millions
or more shares on the market for most traded firms, liquidity isn't an issue.
If you want a share or a few shares in a company, it's pretty easy to get
them. What may or may not be happening here, is that a TON of folks are
currently 'short' on Tesla's stock, meaning millions of folks are going to
HAVE to buy shares of the stock to 'return to their broker' and cover their
short. The problem is that Tesla DIDNT go down.

Normally, lots of folks are short on lots of stocks, and the market just
moves. Occasionally, you get a confluence of events which leads to there being
a high demand for a stock that a large number of shares are shorted on, which
has a self-feeding pain cycle: the stock price is based mostly on demand and
liquidity - as more and more folks HAVE to buy the shares to cover their
shorts, the demand for the stock is going to go up, and thus the price is
going to go up as well. This increase in price increases the pain, and
triggers many brokers to 'call' those margins, requiring MORE people to buy
the stock to cover, driving the demand up even higher. The end result is a big
spike in the price of the stock, and a TON of people losing money on their bad
bets.

~~~
enraged_camel
Thanks, I think I get it now. :)

------
cloudwalking
This is the first of many profitable quarters for Tesla. The Model S is a
better car _in every single regard_ (except for range), than any other car on
the market. It is safer, faster, roomier, more fun to drive, has more storage,
quieter, more convenient, and less polluting.

Electric vehicles will displace combustion vehicles. Everything that makes a
car, the electric car does better.

Right now the electric vehicle market is small, but soon (one decade?) it will
eclipse the combustion market. Tesla is ahead of ALL other vehicle
manufacturers, and that lead will translate into significant market share. As
the electric vehicle market grows, so will Tesla's value.

~~~
lambda
> in every single regard (except for range)

And price, and convenience.

> more convenient

No it's not. The lower range, low number of charging stations, and long
charging times make it quite inconvenient for long trips.

I bought a used car 3 years ago for less than the cost Tesla charges for
replacing the batteries on its car (which you are estimated to need to do
after about 8 years). This car is a station wagon, so has much more storage
space than a Tesla. I go camping every year, about 550 miles from where I
live. I can make that trip in about 10 hours including food and gas stops. For
the same trip, I would need to make at least two hour long charging stops at
Supercharger stations along the way (if I had the highest-end battery option).
But there are no Supercharger stations along my route; so I would need to find
places to charge with ordinary power sources. If I used ordinary 10 kW 240 V
sources, it would charge at a rate of about 30 miles of range per hour,
effectively tripling the length of the trip; now what was a long 10 hour drive
has turned into a 30 hour trip, which means finding places to stop and sleep
overnight (which hopefully can give you a charge).

Furthermore, I live in an apartment, without a dedicated parking space. I need
to park on street. So there's nowhere I could charge my car at home; I can't
exactly run a power cord down and across the sidewalk to my car. Neither is
there anywhere to charge my car at work. There's no way I could even use a
Tesla for commuting right now, let alone longer trips.

With a gasoline powered car, I just fill up at any gas station, my car holds
the gasoline overnight so it doesn't matter where I park, and for the above
describe trip, I need to stop for gas once before leaving and once on the
trip, each a 5 minute stop.

The Tesla Model S is an amazing car. But claiming that it's more convenient,
or is a better car in every way but range, is a vast overstatement. It would
be absolutely awful for me, and many other people with similar needs.

Some of these problems are solvable; there will be more Superchargers
installed, the price will probably come down, there will probably be more
electric vehicle infrastructure. But it's still a gamble to say that they will
completely eliminate all of these advantages that a gas powered car has over
an electric car, at least unless the price of gas spikes dramatically.

~~~
jonknee
> The Tesla Model S is an amazing car. But claiming that it's more convenient,
> or is a better car in every way but range, is a vast overstatement. It would
> be absolutely awful for me, and many other people with similar needs.

Obviously convenience is different for different people. The OP is probably
someone who finds car maintenance very inconvenient and as the owner of a used
station wagon I am guessing you are not. If you don't take frequent road trips
and have the ability to charge at home, the Model S is indeed very convenient
--never have to worry about fuel and hardly ever have to worry about
maintenance.

~~~
lambda
I too find maintenance inconvenient; but my used station wagon doesn't require
much of that either. In the past three years, I've only ever had to have it
inspected, tires replaced, and oil changes. Now, the Tesla doesn't have oil
changes, so that one aspect is removed, but it does have annual maintenance.
So, I'm looking at maybe two oil changes per year, vs. one annual servicing; a
small improvement in maintenance hassle, but not amazing.

But anyhow, I'm not claiming that there are no convenience advantages of a
Tesla; just that there are also a lot of things that are quite inconvenient,
especially if you don't have a driveway or need to take long trips. Claiming
that the Tesla is better in every regard but range is vast hyperbole. For some
use cases, it may be more convenient; for mine, far less.

Beyond that, the price is a major disadvantage; at 4 times the price of a new
economy car for the entry level model, and twice the price of lower-end luxury
brands, it's well outside many people's price range; and you don't even save
that much because you're not buying gasoline, as the combined cost of
electricity plus replacement batteries winds up being pretty close to the cost
of gas you would pay for the same number of miles (depending on exactly how
long the batteries last, and assuming that the relative costs of gasoline vs.
electricity don't diverge too much; of course you could say that gas prices
are likely to go up faster than electricity, but they may go down too).

~~~
ericd
The Model S may not be the best at everything, but it appears to be the best
overall car you can buy right now. It just scored an almost unheard of 99/100
from Consumer Reports (I believe the Civic got in the high 70s to mid 80s this
year)

------
rdl
If you've been in Silicon Valley for the past 6 months, this was obviously
going to happen -- virtually everyone I know who could afford virtually any
production supercar, and cares about cars, has or wants a Tesla. Not an R8,
not a GTR, not a California, not a Panamera, not an M3, but a Tesla. As they
ramp up their production (I think it's down to a few months wait),

The only rich people (who own cars) not getting Teslas seem to be either
totally non-car people (or just cheap on capital costs vs. cost-efficient on
total costs), or those who live in the City without a garage parking spot.
Solving the Tesla street parking charging issue would be the next big win --
you could probably get away with 480v supercharging at work for 2-6h/day and
street parking at home, although weekends might be tough.

~~~
grecy
Does anyone driving any of those super cars you mention park on the street?

~~~
waterlesscloud
It's not a supercar, but a guy in my neighborhood (in Los Angeles) parks his
Bentley on the street.

Me, I'd clean out my garage if I had a Bentley.

~~~
rdl
Back when YC had demo days at YC's office, rather than at a nearby museum with
a parking lot, there were a lot of amazing cars street parked for blocks. And
at least one highly lulzy incident involving an SL65 and an asshole machinist
dragging it with a forklift into the middle of a street.

------
downandout
GAAP profit was $11 million. Zero emission vehicle (ZEV) credits sold to other
automakers amounted to approximately $68 million. In other words, taxpayers
gave $68 million to Tesla this quarter. Without this taxpayer gift, which will
be drastically reduced going forward, they would have posted a loss of $57
million this quarter. Not fantastic.

~~~
jstalin
It seems that their business model is entirely dependent on government
subsidies. So now that wealth is being transferred from general US taxpayers
to the shareholders of Tesla.

~~~
simonh
Considering the $17.4Bn bailout of the conventional US car industry a few
years ago it's small change.

Personally I'd be a little more concerned about the $20Bn per year paid in
farm subsidies, to an industry with median household incomes 17% higher than
the national average, if I were a US citizen. At least the money going into
Tesla is buying the US a lead in the future of automotive technology, instead
of going towards further impoverishing third world farmers.

------
jtlein
I guess it's a California thing. You have to believe in global warming (In the
mid-west we have had 20 degrees below normal now for 3 months and snow of 14
inches in May). My practical side says the Tesla is nice but if fighting CO2
is your aim you could buy a $20K Honda accord and convert it to run on ammonia
( nearest practical gas to hydrogen). Ammonia is already piped all over the
midwest and in contrast to grid power is almost all made from domestic natural
gas. And with a loan of $450 million like Musk got I could build a home
ammonia generator that takes in grid power to generate hydrogen and using
nitrogen from the air. The small ammonia reactor is the only thing that needs
to be developed (the hydrogen generator and nitrogen from air products are
already off the shelf).

~~~
deelowe
I think we'll start seeing very high mpg gasoline cars soon. Supercar makers
are already demoing electronically controlled pneumatic valves and direct
injection and doubly clutch gear boxes are now showing up on family sedans.
Direct injection + independently variably valve timing + double clutch close
ratio gear boxes + regenerative braking and plug-in hybrids should equate to
extremely high mpg for gasoline based vehicles.

I agree with the few here that have stated that tesla is in a SV bubble right
now. It's the just hip thing to do, similar to the prius situation 8 or so
years ago, but with much less volume due to the price point.

------
typicalrunt
I've never seen the fairness of after hours trading. The majority of people
don't have access to it (that I've spoken to), yet that is when you see some
major moves (up or down) in a stock.

Congrats to Tesla for turning their first profit!

~~~
enraged_camel
From Wikipedia:

 _Trading outside these regular hours is not a new phenomenon but previously
was limited to high net-worth investors and institutional investors like
mutual funds.[2] The emergence of private trading systems, known as electronic
communication networks or ECNs, has allowed individual investors to
participate in after-hours trading._

In other words, nothing unfair about it.

------
peterhajas
> This is Tesla's first profitable quarter.

I suppose this isn't factoring in the countless enormous government subsidies.
I don't really count this as "profitable".

~~~
matthewaustin
Ah, well if you get to make up your own definitions of profitable, then I
suppose they weren't.

But if you use the actual definition of profitable, meaning they had more
revenue than expenses in this quarter, then they were profitable.

------
codex
Without the cash from selling California ZEV credits gross margin on the Model
S would have actually decreased quarter over quarter. It will be interesting
to see how it gets to 25% without ZEV, and whether Tesla needs to sell more
stock to finance development of the Model X.

------
anateus
The last several months in Silicon Valley I do not remember the last time I
went outside for more than 5 minutes and not seen a Tesla. I noticed about a
week ago I stopped caring, much as I do not especially remark on noticing a
Honda or a Ford. That's a good sign, though likely very geographically
localized.

~~~
dangrossman
> though likely very geographically localized

I live a bit outside Philadelphia (but visit the city proper often), and
haven't seen a Tesla here yet.

~~~
southphillyman
Lower Merion resident here. I see them from time to time in my area and on
476. Have not seen them in Philadelphia proper yet.

------
changdizzle
I refer to Elon Musk's tweet on April 25:

"Seems to be some stormy weather over in Shortville these days"

<https://twitter.com/elonmusk/statuses/327446760219889665>

------
chuhnk
Ask HN: Will anyone be buying Tesla stock when the markets open tomorrow? I'm
wondering whether its a good investment moving forward?

~~~
encoderer
Wait for profit takers to bring it down a little but yes, if you're willing to
hold for the long term -- 5+ years at least -- I believe in it. I think a $100
price target is not absurd. Of coruse, Tesla is so comically far from becoming
a mainstream car company that it's not for the feint of heart. It's not their
products that will challenge them I don't think. It's the difficult of scaling
a car company. No easy task.

~~~
gfodor
I'd add it's also probably a good idea to wait for some bad news since the
market is probably likely to over-react and anybody still skeptical will see
that as an exit point to take profits.

------
cryptoz
TSLA is currently up 21%! Wow, and still climbing...

Edit: Flying past 27% in after hours trading.

~~~
jakebellacera
When a company gets press like this, the amount of volume increases heavily.

------
niggler
Now TSLA is up 21% (67.90 last trade)

------
clientbiller
Don't... Bet... Against... Elon...

------
goggles99
I remember when Geo Metro's were popular. They got 50+ MPG. Then the fad ended
and... Is Geo still around?

------
olefoo
Meh, Teslas are boring status mobiles now. If you like your electric cars to
be interesting and exciting. Order an Arcimoto [1] instead.

1\. <http://www.arcimoto.com/>

~~~
ricardobeat
You could at least have recommended a <http://litmotors.com/c1/>

~~~
MartinCron
Unlike the Arcimoto, the C1 seems to understand that if you're going to be a
motorcycle, you _should be able to lean into turns_.

