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Is Tesla Motors Inc (TSLA)’s Provision For The 50,000 Mile Warranty Actually $2,000 Less Than Needed?

Tesla Motors Inc (NASDAQ:TSLA)’s like a mystery box as the information creeping in from fundamental sources doesn’t necessarily ease one’s worries about the company and cannot present a clearer image about the manufacturer. It has cut the third quarter guidance from 13,200 to 11,200 leaving the total amount for 2014 to be about 33,000 units, according to Bloomberg. Despite weaker results, the stock is almost 6% up in the first two trading hours reaching almost $244.4 and this is the first paradox that disclosures from Tesla Motors Inc (NASDAQ:TSLA) and reactions created.

Tesla Motors Inc (NASDAQ:TSLA)

The second dilemma is how a company, which fell short of expectations in terms of revenues, manages to reduce losses significantly, about $0.35 per share. All the credit in these occurrences goes to Tesla Motors Inc (NASDAQ:TSLA)’s renewed CEO, as TheStreet pointed out.

“Elon Musk’s SolarCity now expects solar panel installations in 2015 to fall between 920MW and 1GW. For 2014, it estimates deployments will end up between 505 and 520MW, which is about half of what it previously thought it would build. SolarCity said it brought in $58.3 million in revenue in the third quarter. That’s below what was expected. However, its quarterly loss was only 75 cents a share when people were ready to see a loss of more than a dollar,” informed Julia Sun.

The cloud of mystique casted by Tesla Motors Inc (NASDAQ:TSLA) also dims the visibility of the company’s financial planning. Well, not to every single element in their balance sheet or cash-flow statement, but to give a more precise example: warranty spending.

“I think they use warranty provision to move around earnings between quarters a little bit. If you calculate their warranty cost expense to date per mile driven, over the 50,000 mile warranty they should have about $4,500 cost per car. They provision about 2,500 to 2,800, so I think, they’re still low,” said Nathan Weiss, founder of Unit Economics.

In general, it doesn’t mean that Tesla Motors Inc (NASDAQ:TSLA)’s scheming ostentatiously, but it does imply that the market’s further reactions with respect to any input of information will be highly unpredictable.

Disclosure: none
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