Tesla

Following ‌$Tesla Motors(TSLA)$  ‌ 's earnings release, the stock price movement has left many observers puzzled. As is often the case, investors have been quick to craft narratives in an attempt to rationalize the surge. One post from seekingalpha that stood out to me was titled, "Tesla: Don't Keep Letting the Market Take You for a Ride." It effectively summarized key points from the recent announcement and echoed the broader sentiment of what I interpret as a sense of optimism shared by a segment of the investor community. The writer argues that investors who "buckled up" Tesla during its recent dip have benefited, as the stock has rebounded. In addition, it criticizes the bearish media narrative, suggesting it exaggerated Tesla's troubles, particularly around political drama tied to DOGE. With Tesla recovering much of its April losses, the writer believes bullish investors now have reasons to be optimistic.

As a rather risk averse investor evaluating the narrative that "Tesla may no longer be a hyper grower, but setting the stage for 2026 and Beyond" - While others are busy strapping in for Elon's next rollercoaster ride, Im perfectly content watching from a safe distance. Here's why I'm not buying a ticket to the ride:

The reliability of press releases and earnings guidance

Companies communicate information to investors in the form of press releases, media interviews, earning calls, analyst meetings, SEC filings, newspaper boasts and so much more. Most investors get the same information from companies, thanks to rules that ensure clear and consistent communication. So why do investors — many of whom are smart and well-informed — perform so differently? One key reason, in my view, is how well each person can interpret the underlying intent of information. Afterall, it is easy and cost little to produce information regarding product releases and earning guidance. The term “Cost”here means in the form of additional resources required to produce the information (actual financial implication) or an increased risk of mortality. For reasons below, I am highly sceptical about the intent of recent releases and hence have decided not to react and invest in the stock.

- Robotaxis and Affordable Car product launches. Maybe you would have been impressed if you were a discerning consumer of Tesla, but how would the announcement of affordable car production and robotaxis have helped an investor decide if tesla was a good company to buy? One could argue that the press release indicated Tesla's prowess in keeping up with competitive dynamics and seek new growth avenues, and so it was, in fact quite informative. Even if, or whatever it is , were to turn out to be cool technology / strategy, how was anyone to conclude from this information that this will ultimately be a success? How would this knowledge help them decide whether to buy Tesla shares unless they could accurately forecast the profits and cashflows to be made from increased in sales from affordable car segment and profitability of robotaxis?

- Earnings Guidance: Referring to basics of probability. many events are supposed to occur simultaneously would mean that the cumulative probability is based on multiplying all the individual probabilities. Lets assume that Elon Musk and his management team reasonably accurate in their forecast of individual levers, 80%. Thus, the probability of hitting the right earnings number, if it is to be broken into 5 component parts (revenues, discounts, employee expenses, manufacturing expense and sales expenses) would be less than 33% (0.8^5). How would it be possible, even for a world class management team to keep hitting its earnings guidance numbers every quarter or year?. Its almost a mathematical impossibility. Not to mention, Robiotaxi launches have not been rolled out, to serve a revenue benchmark for Tesla. So what is the point of the financial community's laser focus on this number? Earnings guidance is a dishonest signal even though the management and analysts may fervently believe in it. It is cheap, easy to produce and needs little effort to deliver.