Tesla Barely Meets Earnings Expectations, but Stock Still Soars

Tesla CEO Elon Musk

All eyes were on Tesla's 2nd quarter conference call today, and to say the least, this report was a make or break moment for Tesla. In the derivative markets, implied volatility (IV) was at over 7%. This means that the options market predicted that Tesla's stock would either rise over 7%, or fall over 7%. These predictions held true, with the stock soaring 9% in after-hours trading.

This earnings report was definitely great for Tesla investors, who have recently witnessed the stock fall from November highs of $380 to the high 200's. But there was a lot of pain involved too, as Tesla is the most shorted stock in the S&P 500. Prominent investors including billionaire David Einhorn and billionaire Jim Chanos are short on Tesla, and short sellers are estimated to have lost over $1 billion just today alone!

Major points of contention for the conference call included Model 3 production, raising additional capital, and Elon Musk's temper. Model 3 production was at 40,000 units this recent quarter, topping analyst expectations of 38,000 units. But keep in mind that these units were all high-end trims of the Model 3, priced at $47,000 or more, not the promised $35,000 price. 

Elon Musk surprised investors by declaring that Tesla would not need to raise additional capital through bond markets. This was especially surprising since Tesla lost $717 million, Tesla's biggest ever loss. This translated to an EPS of -$3.06, way below analyst expectations of -$2.81. Elon Musk predicts that Tesla will make a profit in the third and fourth quarters, something that will be necessary for Tesla to survive. Over $2 billion of Tesla's bonds mature in 2020, so to prevent additional capital raise, Tesla will need to make a substantial profit.

Finally, part of the reason Tesla's stock could have popped is Elon Musk's apparent maturity during the conference call. Elon Musk has repeatedly made headlines due to his lack of temperament, including calling a British Thailand cave rescuer a "pedo guy". He took the first question from Bernstein's Toni Sacconaghi, whom he had previously insulted by calling him a "bonehead" with "boring" questions. He immediately apologized to Sacconaghi for his actions.

Tesla's stock soaring 9% after this seemingly neutral earnings report demonstrates how Tesla isn't your run of the mill company. Investors didn't mind the company losing $717 million, and cared more about revenue and Model 3 production, which beat analyst expectations.

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