It’s going to be an interesting week for Tesla Motors (TSLA). After all, TSLA stock is volatile even when there’s no news from the electric car company.
And so you have a speculative, momentum stocks that play by a separate set of rules. Like most hot momentum stocks, TSLA doesn’t trade on anything resembling near-to-medium-term earnings. Metrics like price-to-sales or book value don’t mean much either.
TSLA is all about accelerating revenue growth — a bet fueled as much by hope and hype as anything else.
The bull case is that everything else flows from that.
TSLA Stock: More Neurotic Than Most
When a stock is as speculative as TSLA, quarterly earnings reports are fraught with peril. A bet on a stock is always a bet on the future. Tesla’s ambitions are so bold that the future is more uncertain than ever, and that makes any bit of information carry disproportionate weight.
Keep that in the back of your mind when the numbers come out.
You also need to remember that the most important part of any earnings report is how results stack up against analysts’ expectations. So don’t get too down when you see what TSLA serves up Wednesday.
When it comes to the most recent quarter, the expectations are low. TSLA is forecast to swing to a loss of 59 cents a share from an adjusted profit of 11 cents in the year-ago period. Revenue, for its part, is projected to grow more than 35% to $1.17 billion.
The best-case scenario is that TSLA posts a narrower-than-expected loss, beats on revenue and surprises to the upside in any forward guidance it cares to give, both in financials and in future Model S and Model X deliveries.
Shares will rally in that case, but anyone holding TSLA stock shouldn’t care much if it does — just as they should shrug off bad news and a big selloff.
If you believe in the TSLA stock story, you’ve got to maintain long horizons. This advice goes for pretty much any investment, but it’s even more important when a stock is as volatile and speculative as TSLA. If you react to every bump in the road, all you’re going to do is generate trading fees and maybe taxable events, too.
Add it all together — TSLA stock as a trading vehicle, a crazy-high valuation by traditional measures, and heroic aspirations — and you can’t be surprised by anything that happens when Tesla reports earnings.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.