By: Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets.
About two weeks ago, we published an article about Tesla and its future prospects, but today we will talk again about this company.
On 1 August Tesla reported on the second quarter financial data. The results are sad – the company's losses are exceeding the record levels
The losses in the second quarter reached $ 718 million USD, and compared to the second quarter of 2017 have increased by more than twice. If we look more closely at the dynamics of what is happening, we will see that the growth of losses is gradually slowing down and, at the same time, the overall income of the company is growing.
 From this perspective, the future looks pretty bright: if it goes on like this, society will soon be able to become profitable. As a result, among rising losses, Tesla's share price increased by more than 20%. Here, the situation is exactly opposite to that of Facebook, whose share price fell 20% despite the massive growth in earnings. Tesla investors have paid attention not to rising losses, but to Elon Musk's promises to achieve profitability in the next two quarters of the year
Stock prices have been pushed higher by another growth accelerator , which could then lead to an even larger increase in price.
The float ratio for Tesla shares is 27.38% and shows that every third investor is going to be short. Such impressive growth has naturally resulted in the closing of short positions. According to some reports, bear losses on Tesla shares reached $ 2 billion last week, and many have not yet completed their transactions, hoping the price will drop to reduce current losses. But if the decline does not follow, they will again become "clean buyers", pushing the stock price higher.
Tesla presents a unique case for Wall Street; if we analyze its financial indicators, we will see that one should absolutely not invest in a company with such a high short fluctuation ratio.
We compare Tesla with Ford – one of the world's leading automakers. Tesla's capitalization is already 1.5 times bigger than Ford's.
The ratio of capital debt to Tesla is 2.42, meanwhile the same ratio for Ford is even worse – 4.19. Having said that, Ford's profitability is 4.30% and that of Tesla is down and amounts to -18.80%.
Despite positive quarterly results, Ford shares can not form an uptrend and are trading at $ 10 USD. The decline was predicted even before the reports on Ford shares were published in the June 19659002 article]
At the same time, among the increasing losses, Tesla's shares are rising
There are 23 times more pieces in Ford than in Tesla. If, in this situation, we divide the price of Tesla shares by 23, the result will be that a part costs about $ 15 USD. In other words, even in the case of such a comparison, we see that the company's shares are too expensive, and if we add the debts and profitability, it becomes clear why Tesla's short fluctuation ratio is so high.
However, there is another detail that the company had hidden when the report was published. In the second quarter, Tesla moved to a new standard of financial statements of ASC 606 which caused a rise in artificial revenues. When the revenue growth was compared with the same in the second quarter of 2017, the values were not adjusted according to the new rules and it was not indicated that the calculation was made according to the old standard. Therefore, the company has misled investors with these data and it does not seem possible to calculate real revenue growth in the second quarter, as Tesla has not published any detailed information on the adjustments that have influenced this relationship.
If we look at the diagram at the beginning of this article, we note the positive dynamics of revenue. But if we look closer, we will see that the situation is completely different – the revenue values have indeed been inflated, while it is impossible to calculate the actual values at the moment. It turns out that only the third quarter report will reveal the true dynamics of Tesla's revenue. Until now, only the fact of the increasing losses has been confirmed. Based on this information, at the time of publication of the statistics not everyone understood what these numbers reflect. This is why the Tesla demand for shares has grown so sharply.
In light of this, it would be logical if investors reconsidered the situation and started downloading Tesla shares. But historically, Tesla's actions have long ceased to be governed by logic, which is why sellers can once again suffer losses. Along with them, there will be many villains who are predicting an imminent collapse of Tesla and are trying to persuade everyone to sell their Tesla shares. Perhaps their predictions will become reality one day – the only question is whether they will be able to cover the losses, which have been living so long.
If Tesla's actions are not governed by logic, then what is the growth accelerator? The answer is trivial – voices and expectations. Elon Musk has promised that the company will become profitable in the next two quarters of the year (although it always promises something). Tesla is now putting all of its expectations on Model 3 and the huge demand for it.
We can not ignore the talent of Elon Musk. He is not only a great inventor, but also a good seller. Perhaps, it is only his persuasiveness that convinces investors that the future is bright for Tesla and encourages them to invest further. Currently, the company produces 5,000 electric cars a week and plans to produce 6,000 by the end of August.
The technical analysis still indicates that there is an upward trend and that the likelihood of further stock price growth is high. The price is above the 200-day moving average and has rebounded to the support level of 300 USD. The nearest resistance is at 400 USD.
Any provision contained in this document is based on the particular opinion of the author. This analysis should not be treated as a trading advice. RoboMarkets can not be held responsible for the results of trading resulting from the business recommendations and reviews contained in this document.