Investor's Corner
Tesla stock (TSLA) one week after Q2 2016 Report
Post Q2 Report Action
As we previously reported, the Q2 quarterly results were “mixed”:
- Revenue matched expectation, a positive for Wall Street;
- Earning losses were higher than anticipated, a negative, but for a company like Tesla, where the stock price is based on future expectations, the earning numbers are really not what counts;
- Slightly increasing gross margins, a positive;
- Practically zero ZEV credits for the quarter, a negative;
- Production and demand on track to support 50,000 deliveries in 2H 2016, a positive;
- Lower production numbers than previously anticipated, a negative.
When you have such a mix of positives and negatives, it is fairly normal for traders to have a “subdued” response, unlike the usually wild responses to results that are big misses or big beats on expectations.
Accordingly, this time around the technical response of the stock market to last week’s Tesla Q2 2016 report has been “muted.” The stock has been in “compression” (a horizontal back and forth) since the report, staying in the $225-$230 range, but overall 12-month Analyst Price Targets have actually decreased with the average dropping from $277 to $244.
Looking at more details of the reactions to the report, this is a small sample from Top Analysts, noting that none of them changed their position.
Alexander Potter of Piper Jaffray says “Teslas untouchable brand helps investors look past million-dollar losses.”
“It’s hard to recommend a cash-burning company with such an uncertain outlook,” said Potter, who reiterated a neutral rating and $223 price target on the stock. But consumers and investors still seem captivated by Tesla’s products, said Potter. And as long as the company “retains this aura,” its stock multiple will “probably stay buoyant,” he said.
Brad Erickson of Pacific Crest says “The risks still outweigh the rewards.”
“Brad rattled off a number of challenges Tesla still needs to tackle in a note to clients. But he reiterated a sector weight rating on the stock, said Tesla’s cash burn wasn’t as bad as expected during the quarter, and maintained the belief that the company’s longer-term vision is “second to none.”
Ben Kallo of Robert W. Baird says “Focus [is] on Tesla (TSLA) Production Ramp and Long Term Goals, Not Q2 Miss.”
Kallo commented, “Q2 revenue was in line with our estimate, but TSLA missed on EPS with higher-than-expected OPEX. Additionally, gross margin missed consensus estimates and was pressured during the quarter with the Model S refresh and X ramp, but automotive gross margin improved sequentially, which was better than we expected. Importantly, TSLA reaffirmed its 2H:16 delivery target of ~50k vehicles, expects margins to ramp in 2H:16 given higher manufacturing efficiency, and the Model 3 remains on track for 2H:17 production.”
Kallo also covers SolarCity (SCTY) and he commented that “Although SCTY has a 45-day go-shop period which could provide additional upside, we believe it is highly likely the TSLA and SCTY merger will go through, and we are moving to the sidelines.”
Colin Rusch of Oppenheimer “noted that Tesla appears to be taking on increasing responsibility when it comes to technology development.”
“Rusch wasn’t surprised by Tesla’s quarter, and the firm remains on the sidelines until Tesla can show some progress toward profitability. It also appears to have taken a hard line with suppliers on timelines, pricing and allocation of resources,” he explained. “While we see potential benefits, we note increasing risk on supplier pushback.”
Ryan Brinkman of J.P. Morgan noted that “JPMorgan cuts Tesla estimates on higher operating expenses.”
“To reflect lower revenue and higher operating expenses following the company’s Q2 results, Brinkman cut his 2016 earnings per share estimate for Tesla to (32c) from $1.60. The analyst notes his 2016 earnings estimate was $4.62 a year ago and $2.74 at the start of this year. This reflects the “degree of consistent ratcheting down of near-term earnings,” Brinkman tells investors in a post-earnings research note. The analyst keeps an Underweight rating on Tesla with a $180 price target.”
Shelby Seyrafi of FBN Securities “reiterated a Buy rating on Tesla Motors (NASDAQ: TSLA), with a price target of $275.”
Seyrafi is a 3-star analyst with an average return of 0.5% and a 51.5% success rate. Seyrafi covers the Technology sector, focusing on stocks such as Hewlett Packard Enterprise, Dot Hill Systems Corp., and Concur Technologies.
Colin Langan of UBS, says “Tesla, SolarCity synergies still cloudy.”
“Colin noted Tesla announced details of its agreement to acquire SolarCity (SCTY) and provided synergy targets with the deal. UBS said they remain cautious on the deal given the lack of compelling synergies and the fact the deal is an unneeded distraction for Tesla management, which already faces challenges with its Model 3 launch and production targets. UBS maintained its Sell rating and $160 price target on Tesla shares.”
The overall consensus of analysts covering Tesl Motors, reported at tipranks.com, is neutral (hold).
Source: TipRanks
Trade Analysis
Quarterly Reports are usually the catalyst that start or stop actions for swing traders. The Q2 report was no different. I called for a bullish swing trade when the MACD crossed to the bulls on July 1st. The trade closed on August 4th when the MACD crossed to the bears, the day after the Q2 report was released. This was a good trade that gained over $14 in about a month period to traders that went long on the stock (see the shaded band in the chart below). For option traders this was a “fabulous” trade.
A week after the report the market is undecided on what to do with TSLA in the short term. All indicators are “neutral”: the stock has gone sideways for a week; the MACD averages are flat and overlapping; the MACD itself is at zero; both the 50-day moving average (the red line in the chart below) and the 200-day moving average (the yellow line in the chart below) are flat. All of these indicators are showing the absence of a trend. Trading in these conditions is not advisable and fairly risky. I’m personally out of trading TSLA until a trend appears.
Source: Wall Street I/O
Tesla and SpaceX shares fell on Wednesday after Democrats swept both chambers of Congress. The decline stood out as broader market securities recovered and turned positive, while both of Musk’s publicly traded companies lagged.
CEO Elon Musk already joked about the unsuccessful campaigning for the Republicans, but now the new party will make pretty drastic changes to how it handles Tesla and SpaceX, and those companies will adjust their outlook.
Let’s take a deeper look.
Tesla ($TSLA)
Tesla shares traded lower during the regular session after Democrats secured both the House and Senate. The stock was down 2.32 percent at around 1:45 p.m. on the East Coast, trading at around $389.30.
The pressure is tied to more than the raw scale of Musk’s political spending, estimated at $450–474 million this cycle with roughly $224 million directed at Texas. In that state, Tesla now faces a Democratic governor and a Democratic senator after Gina Hinojosa unseated Greg Abbott and James Talarico defeated Ken Paxton.
The Austin Gigafactory, Robotaxi pilot programs in multiple Texas cities, and any related AI compute expansion sit under a new state executive who campaigned against certain corporate subsidies and floated a moratorium on new data-center construction.
Federally, Democratic control of key committees opens the door to deeper examination of Tesla’s autonomous-driving safety record, federal energy-storage and manufacturing incentives, and the national-security implications of any combination with SpaceX.
Investors are also weighing whether the company’s historically close alignment with the prior Republican leadership will invite slower permitting, additional hearings, or tighter rules on Full Self-Driving deployment.
For Tesla, the political shift adds near-term friction around state permitting and federal regulatory approvals for autonomy and energy storage. A potential merger with SpaceX may face slower review even if it proceeds.
Core growth drivers such as vehicle deliveries, energy deployments, and robotaxi rollout remain intact, yet the stock now carries a higher political-risk premium that could weigh on valuation until the company demonstrates workable relationships with the new Texas leadership and congressional majorities.
SpaceX ($SPCX)
SpaceX shares also declined in live trading on November 4 following the Democratic midterm sweep. The stock traded at $134.97, down 4.49 percent. The drop occurred even as broader indexes stabilized, highlighting a company-specific reaction to the election outcome.
Musk’s large contributions, concentrated in Texas races that both companies lost, place SpaceX’s Starbase launch facility and headquarters under a new Democratic governor.
At the federal level, Democratic control of Congress enables greater scrutiny of NASA, the Department of Defense, and other contracts that support a meaningful share of revenue, along with reviews of Starlink national-security uses and any Tesla merger. Analysts have noted that empowered committees can hold hearings and request documents on these relationships.
For SpaceX, the results raise the risk of delayed contract awards, higher compliance costs, and tighter constraints on AI and satellite infrastructure expansion, particularly in Texas where a data-center moratorium has been discussed.
A merger with Tesla could encounter political friction that slows integration of launch, connectivity, and autonomy capabilities.
While Starlink growth and launch cadence continue as primary drivers, the company faces a more contested path for federal funding and state-level operations, requiring management to rebuild ties with the new congressional majorities and Texas leadership to limit the overhang.
Elon Musk
Elon Musk calls Earth’s data centers “peanuts” next to what SpaceX is planning in orbit
Elon Musk says SpaceX capex efficiency is underestimated as orbital data centers loom by 2028.
Elon Musk is pushing back on one of the biggest worries hanging over SpaceX stock. In a reply on X on Sunday, Musk said the company’s capital expenditure efficiency is severely underestimated. He was responding to a Milk Road Stocks post citing analyst Kyle Reidhead, who estimates SpaceX will need to spend roughly $470 billion over the next five quarters.
Reidhead built that figure around the target SpaceX set on its third quarter earnings call: 13 gigawatts or more of compute by the end of 2027. In his breakdown, Nvidia captures 83 to 89 percent of the spending. SpaceX ended the quarter with 1.7 GW of nameplate compute and guided to $35 billion to $40 billion in fourth quarter capex, as Teslarati reported.
Musk did not attach a number to his claim, but the earnings call shows the argument. CFO Bret Johnsen said new compute currently pays for itself in under a year at today’s pricing, and Musk said that window could shrink to six months next year. Using that pace, Reidhead argues about $230 billion of the $470 billion could come from operating cash flow and about $60 billion from SpaceX’s roughly $90 billion cash pile, leaving around $180 billion to borrow. Musk confirmed last week that SpaceX had already closed a new $40 billion debt raise to buy GPUs.
The ground buildout is not the end goal. It is what is meant to pay for the move to orbit. Replying on Friday to charts built from Sequoia partner Shaun Maguire’s SpaceX model, Musk wrote that “Terrestrial compute will be peanuts compared to orbital compute,” adding that orbital compute deployed per month “probably exceeds terrestrial around the end of 2028 and then far exceeds it in 2029.”
Maguire’s model shows how steep that path is. It has capex climbing from $88 billion this year to $290 billion in 2027 and $369 billion in 2028, with SpaceX burning $77.8 billion in cash this year and $122.6 billion next year before turning $114.9 billion cash positive in 2028. Musk’s response to the model was, “I think we can do better.”
The orbital half runs through Starmind. SpaceX plans to operate up to 1 million AI satellites flying in clusters of about 10, linked by roughly 10 terabits of bandwidth, with deployment of thousands of units starting as soon as late 2027 out of its Gigasat factory in Bastrop, Texas, according to SpaceX’s space safety page. Musk has said each Starmind spacecraft will carry more than 250 kW of solar power.
Getting there depends on launch volume. Maguire’s model assumes 250 Starship flights in 2028, up from two this year and 38 next year. The nearer test is financial: SpaceX guided to $33 billion to $37 billion in first quarter 2027 revenue, more than double the $14.58 billion it booked in Q3, and Musk reposted that guidance again on Sunday morning.
Elon Musk
SpaceX President to gift Trump Accounts her SpaceX stock
Gwynne Shotwell’s 2 million SpaceX shares are headed to children’s Trump Accounts starting this December.
SpaceX President Gwynne Shotwell said Friday that more than 2 million SpaceX shares belonging to her and her husband, Robert, will be distributed to children’s Trump Accounts in December, turning a pledge she made over the summer into an actual transfer. “Robert and I are thrilled that our gift of over 2 million shares of SpaceX stock will be distributed to children’s Trump accounts in December!” Shotwell wrote on X, adding that the shares are “transferring to escrow as we speak.”
The first round goes to children aged 11 to 17 who live in ZIP codes where the median family income is $57,000 or less, along with kids in ZIP codes with too few residents for the Census to report that figure. Shotwell said those families should receive a notice by Monday, Reuters reported.
A second gift is expected to be finalized in the next few weeks. That round will cover eligible children in military families serving overseas, children in foster care, and more kids in Texas counties near the Shotwells’ home where median family income is $90,000 or less. Elon Musk replied to the announcement with “Cool” and a heart emoji.
Shotwell first announced the donation on July 6, less than a month after SpaceX priced its record IPO at $135 per share on the Nasdaq. IPO filings showed Shotwell owned about 12.6 million SpaceX shares, Quartz reported at the time, which makes the gift roughly one sixth of her stake. At the roughly $146 per share used to value Musk’s own pledge earlier this month, 2 million shares are worth about $290 million.
How the stock would actually reach the accounts had been an open question since July. Treasury guidance acknowledged that stock donations could flow into Trump Accounts, but it did not explain the mechanics for a program whose contributions default into an S&P 500 index fund. Shotwell thanked the Treasury, the IRS, the Dell Foundation, Greater Horizons, Invest America and the law firms Morgan Lewis and Gibson Dunn for “working over the past few months to make this happen.”
The transfer also works as a dry run for a far larger gift. On October 19, Musk said he would give one of his SpaceX shares to every kid in America next year and called it “the first of many.” With roughly 72 million children in the country, that pledge is worth about $10.5 billion. President Donald Trump thanked Musk the same day and said the shares would go through Trump Accounts, though neither SpaceX nor the Treasury has published how or when that distribution will happen.
Shotwell’s recipients also fill a gap in the program itself. Trump Accounts launched on July 4, and the $1,000 Treasury deposit only goes to babies born between 2025 and 2028. Teenagers aged 11 to 17 receive no government seed money, so for many of the families getting a notice on Monday, SpaceX stock will be the first asset in the account. The accounts convert into retirement accounts when the child turns 18.
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