And you know what? All the headlines are true! Knowing which takeaways matter is the hard part, and particularly with investing, if you did know, you’d be very rich.

I think the YoY EPS is the least interesting and more erratic headline personally.

They had one prior profitable quarter which happened to be Q3 2018. That was under a full subsidy regime only selling the highest ASP Model 3s while there was still higher volume X/S sales to boot.

All eyes are definitely on G3. Tesla spent 2019 improving process efficiency and returning to profitability but have been seriously production limited the last two quarters.

G3 production coming online for China, also by the way just in time to avoid a steep rise in import tariffs, is hugely critical for Tesla, and China as a long term EV market is absolutely massive. Getting China excited about a locally built Tesla is super important, and G3 production of 3k units/wk by the end of the year should be a massive boost to their bottom line, because those should be higher margin units even if they are somewhat lower ASP than their global average.

It’s definitely not the beginning of the end for Tesla and I don’t think anyone should come away from this particular report feeling more pessimistic about TSLA than they were going into it.

> They had one prior profitable quarter which happened to be Q3 2018

Both Q3 and Q4 2018 were profitable, and so was Q3 2016, and Q1 2013.

Damn I should have known that. You hear so many deride Tesla over and over I internalized the “they were profitable for one damn quarter” and took it as fact.

  March,     2013 - $ 11.5M
  September, 2016 - $ 21.88M
  September, 2018 - $311M
  December,  2018 - $139M
  September, 2019 - $143M

In terms of being profitable or not a quarter, can't you use accounting techniques to twist this? I know that you can play off assets that still need to be paid as income. Or is the meaning always precise?

For example, the first two don't say much; the third is much more significant and probably difficult to fake.

Personally, I think the most important is whether they can follow their game plan: make a lot of debt for car n, pay all off plus make a little; restart for car n+1. Also, n+1 should sell more units than n.

>can't you use accounting techniques to twist this?

Yes. Elon literally said, "Profits from here on out!" the last time they made profits. Then, Tesla proceeeded to lose 700MM the next quarter.

It's very interesting to read back over their 2018 Q4 report. They knew that starting up international deliveries would have a significant impact on recognizing revenue on all the vehicles they were able to build, whereas selling locally they can count on selling them pretty much as they came off the line;

> While the number of Model 3 vehicles produced should increase sequentially in Q1, deliveries in North America during Q1 will be lower than the prior quarter as we start delivering cars in Europe and China for the first time. As a result of the start of Model 3 expansion into Europe and China, deliveries will be lower than production by about 10,000 units due to vehicle transit times to these markets.

What actually happened was that production rate fell by ~10,000 from 86.5k to 77.1k and they also had deliveries fall behind production by 15,000 instead of their expected 10k;

> In Q4 2018, Tesla produced a total of 86,555 vehicles, and delivered 90,700 vehicles. In Q1 2019, Tesla produced 77,100 vehicles and delivered 63,000 .

I'd have to research the cause of the production drop, but that combined with a larger than expected delivery lag (compared to the prior quarter where they actually over-delivered vs. their production rate) is why they had such a tremendous loss. On top of all that I'm pretty sure gross margins also fell, and the S/X/3 mix became significantly more 3 dominant as the tax credit dropped.

So while I would not dispute that there are tricks that can be pulled, mostly in this case that would come down to the level of CapEx, which for Tesla is now below their depreciation. That's a metric which typically shows a slowing growth company, but in the case of Tesla could just be more reflective of how wasteful their spending actually was in the past (e.g. trying to fully automate production al la "alien dreadnought" and failing).

But in the case of Q4 2018 vs. Q1 2019 really what happened is they had significant issues with production, deliveries, and margins all at once driving down revenue well past anything they could correct by controlling spending.

Not to carry on about it, but any company can decide how much they want to invest in future growth, and if they will raise money to finance that, or if they will constrain their expenses based on their revenue and margins. That's not financial engineering or an accounting trick, that's just basic risk management and calibrating your spending based on your growth opportunity versus your cost of capital.

What we've seen in 2019, I think, is a focus on aligning the company for profit before the next push. I would not expect Tesla to have increasingly large profits each quarter, because it would be strange for them to sit on an increasing cash hoard ($5B+) when they have so many good ideas on how to spend it. Namely, building more factories for Model 3 & Y, getting into battery cell production, and whole new lines needed for the upcoming truck, and Semi production.

You sounds fairly informed about the financials, and that's appreciated. Still:

>What we've seen in 2019, I think, is a focus on aligning the company for profit before the next push.

They are not profitable. They achieved profitability this quarter, but have lost money every year for their entire existence. Is this different from Q3'18?

>because it would be strange for them to sit on an increasing cash hoard ($5B+)

I'm not sure they have a "cash hoard" for any longer than the 10 minutes of their quarterly report. Drawing on debt debt to increase cash balance doesn't affect the balance sheet.

>Namely, building more factories for Model 3 & Y

Where did building more factories, and staffing them, show up in the financial reports? How can all of the labour and capital expenses stay the same (or fall) while this occurs? It's confusing that a company can essentially double its productive capacity without it being seen in the numbers. Can you shed light on that?

Despite what some of the conspiracy theorists on this site say, I may be...anti-Tesla? But only because I think it's such a compelling story. I don't short it (I don't short anything), and I don't talk about it outside of this site (where I talk about it too much). I really don't get it: the financials are a mess, Elon is, imho, a jerk, and yet...

And keep in mind profit is not actually that relevant in many ways; notoriously, AMD has been operating at a loss for most of its existence (iirc).

>AMD has been operating at a loss for most of its existence

And this makes profit irrelevant how exactly?

well, all you need to know is if they beat Street expectations for EPS and FCF...which they did...massively...which is why the stock is up 20% after hours.

Still, a stock valued for massive growth with a revenue decline is definitely something that should leave you with a bad taste in your mouth.

It's not really that surprising. The growth expectations are taking into account that there are still several new markets to enter (Model Y, pickup, semi, etc.) and that continued reductions in manufacturing costs should allow lower prices which lead to higher sales volumes.

But last year there were more tax credits, which front-loaded a lot of sales into a year ago, and they haven't released a new model this year. So this YoY decline wasn't that this quarter was unusually bad, it was that this quarter a year ago was unusually good.

People seem to act like the Model Y will just be an entirely additive thing to Tesla sales. How many Model 3's will be cannibalized by Tesla announcing a cheaper crossover? The demand for each of their vehicles is very interrelated, as seen by what the Model 3 has done to S/X sales in every country it has entered.

What I see with the revenue decline, and if you look at sales patterns by the countries they have entered is a company whose number one vehicle, the Model 3, has peaked in demand. I don't see many levers for them to really increase that, and many of the company releases, like the Model Y, will only cannibalize more of that demand.

Having the Model 3 take sales from Model S or X wasn't great because it costs less. The Model Y is priced above the Model 3. People buying it instead would only increase their revenue.

Yes, but how many Model 3s will they sell when they start selling Model Ys? If they're selling 300,000 Model 3s a year, I would expect that number to decrease when the Y is released.

Suppose they don't compete with each other at all, so they continue to sell 300,000 Model 3s and then sell 200,000 Model Ys. Suppose they do, so in that case they drop to 200,000 Model 3s but sell 300,000 Model Ys. Isn't the second case better for them, since they get more for the Model Y than the Model 3?

Won't being locally built diminish its attractiveness?

A lot of European carmakers already assemble in China, partnered with local companies via joint ventures due to regulations. Tesla's G3 is the first major 100% foreign owned car factory in China IIRC.

Brands aren't usually valued by where they are manufactured. People don't care that Foxconn assembles their iPhones.

Part of the problem is that the Internet has resulted in lots of these news outlets simply trying to be first on a story and then editing articles in real time. For example, that negative WSJ headline doesn't appear to exist anymore and now their article on the subject it titled "Tesla Holds Down Expenses, and Its Shares Surge" with the 54% number relegated to a subheading. Odds are that article will continue to be edited for days and will have a variety of different headlines in that time.

Bet there are always multiple headlines and they're A/B tested for the most views.

Actually (WSJ alum here) our long-ago training was to lead the story with the percentage change in net income, no matter what. The assumption was that in a congested world, that was more likely to be the most useful metric. And it was a simple, easy-to-find number.

Focusing on net income was meant to keep inexperienced reporters from being bamboozled by IR/PR departments that sometimes went to crazy lengths to find something positive in the midst of a crummy report. (One tech company with dwindling sales, profit and market share liked to talk about its strong cash position.)

Of course, that was in the days before up-to-the-second updates on after-hours trading. So now reporters know the market's verdict within a few minutes of the earnings release. That leads to financial-results stories that hunt for something (earnings? revenue? next quarter outlook?) that explains the stock movement. In this environment, different metrics get different levels of prominence all the time.

I wouldn't burn up a lot of energy coming up with conspiratorial reasons why reporters pick different numbers. Inexperience and confusion usually are the simple reasons for 90% of strange decisions. This is probably true in a lot of areas.

Cry wolf enough times and you just start getting ignored though. I can't say I ever click on any Business Insider or the Verge articles anymore regardless of title.

It would be awesome to have a reference list of examples to demonstrate how twisted headlines from major sources really are. Any come to mind?

Verge has anti big tech bias. anti amazon anti Tesla, anti anything or anyone that is big and successful or rich.

Really? I'd say the opposite. They love tech. That's the bread and butter of what they cover. Any anti-articles are due to the fact that that is almost all they cover.

The Verge and other Vox publications definitely do push an anti-tech angle is it's digestible by the populace.

This only makes sense of people who do enough research to realize it's false information. A lot of people just care if the headline fits their own narrative.

If people would ignore fake news, we wouldn't have so much misinformation issues, people biting the onion and flat earthers.

Not usually -- most of these articles end up being consumed very quickly after publication, so A/B testing wouldn't yield any actionable data.

This is why you just go to the [EDGAR files](https://www.sec.gov/edgar.shtml) and think on your own.

If you want entertainment, read the interpretation given by a news organization with your preferred bias.

If you want real insight, read articles with conflicting agendas. I suggest Barrons and WSJ as the obvious conservative-agenda choices, and Bloomberg and Financial Times as liberal-agenda choices.

not to diminish the effort of reading different viewpoints but I have to chuckle about the fact that we live in times were the ideological spectrum spans the astonishing distance from the Wall Street Journal on the one side to the Financial Times on the other

Don’t worry, each one will wrote the opposing headline tomorrow to close the loop.

Best to look at the earnings release itself to get the most objective picture. Or if you want a single metric, look at the after-hours stock movement. TSLA is up 20%, so it can't all be bad news.

> Or if you want a single metric, look at the after-hours stock movement.

I think this is a good rule of thumb, but for famously volatile securities (Tesla, Bitcoin, etcetera) you are really just swimming in a sea of irrational exuberance and nobody knows how it's going to end. Maybe Tesla will be the world's richest company in 10 years. Maybe Tesla will go bankrupt in 2. I don't know, but looking at Tesla stock trends doesn't tell you anything other than how unstable it is.

Also short term stock movements, especially after earnings can be due to Keynesian beauty contests. you think other people think the headline is positive. even if you think the actual results are bad, you still buy because the price is dictated by the greater fools, not you.

After Hours can be low volume and not entirely indicative. The full next day of trading is usually a much more sober indicator.

yeah there is randomness but the companies that tend to go away often have a fatal flaw, such as being dependent on a single customer, or are fads, or have cut throat competition and tiny margins. This is why clothing companies are such bad investments compared to information tech. Tesla has none of those problems.

ME: It's not a good idea to look at stock trends for anything super volatile.

YOU: Tesla doesn't have problems like other stocks.

How is this relevant?

A couple of sentences from the BBC story that probably explain what's going on:

> The firm also reported an unexpected profit of $143m (£110.7m) for the three months to 30 September. That beat forecasts, but was down more than 50% from a year earlier.

The most effective method of manipulation is by selectively highlighting parts of the truth while purposely obscuring other portions.

That’s why it’s so important to not passively intake information but be aware of and actively introspect when doing so.

One of these headlines will A/B test to win viewership and ad revenue. The actual facts do not matter; they're optimizing for colorful and exciting headline. To get clicks, they'll make the headline seem extremely positive or negative, as neutral is uninteresting.

One big reason I built https://legiblenews.com/, which scrapes Wikipedia’s news once a day for headlines, is because their agenda is to be encyclopedic. The headlines link to encyclopedia articles (except for the sources obviously) where if clicked, people might accidentally learn something.

Wikipedia has its own enormous biases; it's editor population is enormously white, male, and American. That changes the filter of what they believe to be notable.

I don't see a realistic way to include every social group of human, proportionally to their impact. This is enormous task. And if we could - would you read news that has 20% content praising chairman Winnie-the-Pooh Xi? Because that's what proportional system would bring. Or 20% news about benefits of peasful islam.

If whole country pushes certain narrative would it make the truth due to sheer number of supporters?

PS: I'm not saying that WASP news are unbiased.

What I'm saying is that we should not take Wikipedia as some paragon of unbiased news. Your editor population determines the content that is published, critiqued and updated. They might have better standards than many online edited sources, but they are far from lacking bias.

If a human was involved, it was biased.

Every piece of market news that says "market change X, because incident Y" is pure speculation since there is no way to establish Y as the cause. I wish they would just say "X happened, and also Y" and stop thinking they can attribute cause and effect.

>Every piece of market news that says "market change X, because incident Y" is pure speculation since there is no way to establish Y as the cause.

This is not correct. There are many market news items that can be directly attributed to another event. Boeing's numbers this week are directly attributable to the Max fiasco. The company and analysts agree on this. Why would you assert that it's "pure speculation."

I mean, he's right that correlation =/= causation, but you're definitely right that there's a lot of times the link between the two are pretty obvious

Fair, if it's a specific stock and a specific event affecting that company, I don't have so much of a quibble with that (although it could still well be that 0.2 of that selloff is because of the event and the remaining 0.8 is because the first 0.2 sold.)

I'm more thinking of the "Markets are down 1% today because of uncertainty associated with the China trade"-style reports.

Note WSJ changed their headline to "Tesla Delivers a Surprising Profit" (the URL still has the old headline): https://www.wsj.com/articles/teslas-quarterly-profit-drops-5...

Sometimes they do that with clickbait titles to get initial article traction, or test titles.

Most of the time I doubt that. You can't really get good test data on the amount of time a day old article exists.

It's up 20% after market though. Inflection point reached? Now it's a matter of organizing the momentum.

I mean, all of these are true. WSJ's quarterly profit decline is probably the least accurate headline. To be honest, the fact that they have a YoY revenue decline is much more significant.

It's all noise. Read the 10q and and decide for yourself.

10-Q isn't released until weeks later

The financials themselves are the facts, everything else written about it is interpretation and punditry.

Why the need to add "today", has news ever been any different in that regard?