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Tesla Motors Inc (TSLA) Skeptics Won’t Budge Despite Earnings Beat

Tesla Model 3 (TSLA)

Tesla Motors Inc surprised many on Wall Street when it posted its second-ever profitable quarter, but bearish analysts are still not convinced about the future of the electric carmaker, says a report from CNBC. Several analysts poked holes in Tesla’s unexpected revenue beat and profit a day after it announced that it earned 71 cents a share.

Tesla’s revenue beat – what’s wrong?

JPMorgan repeated its underweight rating on the automaker as its’ September quarter result did not reduce its high execution risk next year. In a note to clients on Thursday, Ryan Brinkman, JPMorgan analyst, acknowledged that the automaker has a good quarter, but not as good as it seems. The analyst added that they remain cautious on the automaker.

Tesla Motors Inc. (TSLA) Store in Southern California

In the note, the analyst further told investors that Tesla’s Q3 earnings seem to represent a strong beat to JPM estimates and consensus across all metrics at first glance, but they see one reason why the Q3 earnings report “is not as good as it looks, and another reason why it might not be as good as it looks.”

Brinkman’s issue are tied to Tesla Motors Inc ’s revenue beat. Tesla’s results included about $140m zero-emission vehicle credits – distributed to companies for selling zero-emission vehicles. That is far more than what many analysts had predicted. In the previous quarter, the automaker recognized a negligible amount of revenue from ZEV credits.

Brinkman said another reason why the sales beat the forecasts by such a long margin could be the changes the automaker made to the way it reports revenue. Even though the approximate number of deliveries in the quarter was known before time, the revenue still came in at $2.3bn versus a consensus estimate for $1.9bn, the analyst noted

“We feel the difference clearly relates more to the change in accounting than it does to [average selling prices],” the analyst said.

Some caveats for Tesla

Barclays analyst Brian Johnson, who has a neutral/underweight rating on stock with a $165 price target, noted that the carmaker completed the quarter with $3.1bn in cash, which is way more that its $1.8bn estimate. However, he did give some warnings like the higher ZEV credits, the under-spend on capex, more than expected hike in payables and likely re-borrowing of money on the asset-backed credit line.

Where some analysts stay cautious on Tesla Motors Inc , there were others, who have been more bullish on the stock in the past, continue to hold their positions. Ben Kallo – a Baird analyst – reiterated his outperform rating on the automaker, citing better operating efficiency, strong gross margin, and confirmation from management that the Model 3 and Gigafactory schedules are running on time.

On Thursday, Tesla shares closed up 0.88% at $204.01. Year to date, the stock is down over 14% while in the last one-year, it is down over 2%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.