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Tesla's Stock Bump - Is the Reason Really This Simple?

Tesla's stock has gone up by over 20% following some good news from Tesla. Here's what really caused the bump.

Tesla earned a very nice stock bump with great news in its quarterly earnings report this week. The stock rose from a valuation of $253 per share to around $300 per share instantly. The stock jumped to that new value as soon as the NASDAQ opened for trading following the report. What is even more impressive, is that the stock has since risen another $25 per share to a valuation of $327 at the time this story was written. This after investors had a few days to really think hard about what Tesla's report included.

tesla stockTesla Stock - Profits Matter
We won't dive into every detail of Tesla's recent report here. Why bother, when you can simply click on the report and read it yourself? Taking a view from a distance, the thing that makes this report different from most Tesla quarterly reports is that the company made a profit for the quarter. As opposed to losing money. Making a profit is ultimately the point of most publically-held companies. Investors see it as important. Tesla isn't a startup anymore. It was founded by Martin Eberhard and Marc Tarpenning on July 1st, 2004. So Tesla is now in its sixteenth year of existence. Making a profit is not the only quarter-to quarter goal. But it darn sure is one of the goals investors have. Don't believe it? Look back exactly a year. In Q3 of 2018 Tesla reported a profit. Its stock rose from $258 to $354. You may want to mark your calendar for Mid October 2020 if you play the stock market. Lightning could strike 3 times.

tesla stock gainsTesla Stock - Promises And Behavior Matter
Another interesting aspect of this quarter is that Elon Musk didn't break any new or large promises. He didn't end the unlimited free Supercharging program this past quarter, he didn't exaggerate production capabilities. He didn't even call anyone a pedophile that we can find evidence of. There was no new lawsuit by the SEC, and he didn't smoke weed on any videotaped broadcasts. It was a pretty quiet quarter. Interesting how the stock bump coincided with that.

Tesla Stock - Non-Automotive Business Matters
Tesla didn't buy any failing companies from any Musk family members in Q3. The one Tesla had previously purchased, Solar City, has been so down and out that any small bump now looks like a huge gain. Never underestimate the power of a sales bump, even for a company that has almost no sales. Tesla's non-automotive business can be an asset or a distraction to its auto business. In Q3 it was mostly benign.

Tesla's stock may have been influenced by many other factors in the past week. There is good news from China. Good news regarding vehicle development plans, and the Model Y seems to be headed to production in a bit less than a year. All of these may be helping Tesla's stock. Or, it could be the profits, since the exact same stock bump was seen exactly one year ago and none of those same factors were involved in October 2018. Maybe a solid stock price is simple after all? Profits.

In addition to covering green vehicle topics, John Goreham covers safety, technology, and new vehicle news at Torque News. You can follow John on Twitter at @johngoreham.

Stock charts courtesy of Google and NASDAQ.


DeanMcManis (not verified)    October 28, 2019 - 6:19PM

Tesla Solar and Powerwall is looking like a pretty enticing deal right now, especially with my lights out at home. I am glad that Tesla stock short sellers lost money. They have feverishly been sponsoring bad news about Tesla for years now, but it can't rain every day. I do not see any benefit in short sellers negative efforts, so I hope that Tesla stock keeps going up.

John Goreham    October 28, 2019 - 6:42PM

I think TN could use a detailed story about how Tesla short sellers work. I don't know the topic well enough to articulate it. I assumed that a short seller only loses money if they make a trade on the stock they have "shorted." Many folks seem to be reporting that they "lost money" so I assume I am mistaken.

DeanMcManis (not verified)    October 28, 2019 - 11:17PM

Normally when you buy stock, you are investing in the company, and when the company succeeds everyone makes money, ideally. But short selling is betting against a company by borrowing stock from a stock broker and having them sell it at the current price, then when the stock price drops you rebuy the stock at the lower price and replace the borrowed stock, pocketing the difference. But with Tesla stock some people have made millions by shorting the stock and then creating negative stories on the internet that instill doubt in the company to force the stock price to fall. This is done for the sole purpose in profiting off of the loss in stock value, and it is specifically what has artificially forced Tesla stock down for so long, because speculators would post a thread talking about how Tesla owed too much money to ever make a profit, or highlight small issues, and make it seem like they are huge problems, or fake a video of someone who fell asleep with Autopilot on in a Tesla. These stories are published many times a day, and you usually repost them regularly here, and meanwhile some greedy speculator gets rich while Tesla investor's stock loses value. Happily, Shorting stock is a risky proposition because if you are betting against a company that is NOT failing, eventually the stock price will rise, and the greedy speculators have to buy the stock at the higher price to replace the borrowed stock, and take a loss on the difference. Betting AGAINST success and innovation for personal gain is exactly what we do NOT need in the world today.

John Goreham    October 29, 2019 - 8:51AM

In reply to by DeanMcManis (not verified)

I follow all that. But wouldn't a person shorting Tesla stock have to in fact make her final trade in order to make or lose money? So, only those attempting to short Tesla stock who have actually cashed out of the transaction at a higher price than they "bought" would have lost money over the past week, right? There are two other possibilities. 1) They may have made their arrangements when the stock price was higher than now and made a profit, or 2) they may not have cashed out and may be waiting for the stock to move lower. In both of those cases, they have not lost money on the recent stock price change. Is that correct?

DeanMcManis (not verified)    October 29, 2019 - 2:20PM

Yes, they would need to make the final trade before they saw their loss, but because they borrowed the stock there is most likely a time limit on when it needs to be returned or repurchased, and if the stock price rises up further their liability and loss will increase. The Tesla stock prices were down before this, so it is unlikely that the stock broker would have allowed the borrowed stock to not be replaced if they had been borrowed earlier when the value was higher than it is now. The problem with waiting for the stock price to drop again is that it is compounding the risk, because if it goes up further the short seller will lose even more when they run out of time and need to replace the borrowed stock. With normal stock purchases the buyer cannot lose more than the purchase price of the stock, but shorting stock can potentially lose more because they have to replace the stock at whatever value that it currently is selling at, and it could rise over the original value as a difference (although that is unlikely). Hopefully these stock shorting losses will dissuade speculators from betting against Tesla in the future.