WHY IS TESLA CRASHING AFTER "GOOD EARNINGS"?!
In a Nutshell
Tesla's earnings beat masked revenue declines, shrinking net income, and negative free cash flow, yet the stock still trades at a 196–400× forward P/E as an automaker with flat growth. The disconnect stems from unproven promises around Optimus and full self-driving, leaving fundamentals unable to justify the valuation. Traders capitalized on the post-earnings pop by shorting Meta and considering Tesla, highlighting how the market quickly punishes any sign of weakness in high-multiple names.
These notes were generated by AI and may contain inaccuracies.
Meta and Tesla announced their earnings on the same day, with results broadcast live. A small short position was taken in Meta after the results were announced and the stock initially jumped upwards. The stock was pushed higher following the announcement of guidance, peaking near 750 before a sharp correction began. Additional sales were added as the trend improved, resulting in the biggest profit of the day. Meta reached $3,800 from a simple corrective move after the buying spree, triggered by concerns about overspending and free cash flow that had officially turned negative.
This is the concern of all investors regarding "Meta".
The trade was initiated as a small sell trade to reverse an "overbought" situation and was closed completely shortly after markets opened. No further trades were made on Meta following the earnings announcement. The decision to short Tesla was considered due to the 6-7% rise expected from the announced profits, which would have presented an opportunity to go all in on the sales center.
Elon Musk is recognized as one of the greatest minds of the generation and is making radical changes in markets, but he exaggerates promises and falls short in execution. Tesla is no longer a startup company but an established company that is no longer actually growing. The Optimus robot still does not exist, and the Roadster car has been delayed for another two years after a 10-year delay. Full self-driving remains uncertain. Markets ultimately care about fundamentals, which explains Tesla's extreme volatility as one of the stocks that collapses most sharply when markets decline.
Earnings per share exceeded 7% outwardly, but revenue recorded a slight decline. Earnings per share fell by 4% year-on-year, and revenues also fell year-on-year. Earnings per share increased by 45% compared to the previous quarter, while revenue decreased by 1% compared to the previous quarter. Net profit declined from $1.37 billion last year to $787 million. Netflix posted a higher quarterly net profit in the third quarter than Tesla. Tesla's market value has reached $1.5 trillion while producing less than $1 billion in net profit per quarter.
The energy sector, which achieved the best gross profit margins, recorded a decline in revenues with operating margins of 2.6%, and the energy sector fell by 16%. Revenues in the automotive sector decreased by 3%. Tesla is fundamentally a car company that manipulated people's minds into believing it was an energy company. Balance sheet shows annual decreases of 3% in automotive and 16% in energy sectors. Net income attributable to ordinary shareholders decreased by 43%, earnings per share decreased by 44%, and free cash flow has decreased by 62%.
Tesla trades at 196 times its profits using forward price-to-earnings ratio, with actual price-to-earnings ratio at 400 times its profits. Meta showed a slight decline in earnings per share while investing heavily in artificial intelligence. Tesla's performance since 2024 has been stagnant compared to other AI-related investments that accelerated during the same period.
The market and Wall Street are very critical of certain companies while being very lenient with others. Tesla receives leniency that would not be given to companies like General Motors. Investors are questioning how to justify a price-to-earnings ratio of 400 when the car company is experiencing slower growth.
Micron trade resulted in $2000 profit for the day. MSTR trade ended with no profit or loss. A short position on MSTR was closed because positions are not held overnight, particularly when uncertain whether markets would rally after earnings while Bitcoin continued to decline. The anticipated movement during regular trading hours occurred during extended hours instead.
Bloom Energy will announce earnings after market closes tomorrow, and American Airlines will report before market opens. Live trading sessions occur every morning for 30 minutes to an hour when markets open.
Tesla has underperformed on everything related to artificial intelligence over the past two years. Investment in Tesla has been stagnant or losing money while missing the AI boom. Whether consumer demand can meet expectations for Optimus robots remains uncertain. Time will determine if tangible results materialize with the Optimus robot.
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