Autos

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

Let's face it: Tesla's earnings just aren't that important. For one thing, would you look at this chart and conclude this company's stock has jumped more than seven-fold over the same period?

Irrelevant
Tesla Motors' quarterly earnings per share
Source: Bloomberg
Note: Diluted EPS.

Tesla stock is utterly indifferent to whether the company's losses are bigger or smaller than analysts predict. Wednesday's miss, at 77 percent, was the biggest ever, according to figures compiled by Bloomberg -- and the stock initially traded up after hours. I looked back at the prior 24 quarters and compared the amount by which Tesla beat or missed the consensus forecast with the next day's share price move, using data compiled by Bloomberg. The correlation coefficient was all of 0.0374 -- or, among friends, "zero."

Ah, but Tesla's a growth stock, so the more relevant metric is revenue. And so it is -- but not by much, given a correlation coefficient of 0.142. (Revenue also missed this quarter, by the way.)

Earnings? What About Them?
Source: Bloomberg

Even vehicle deliveries weren't really worth squat heading into Wednesday evening's second-quarter release: Investors knew already Tesla had missed its own guidance.

What really matters is the amount of cash Tesla is burning. We know this, of course, because silly buggers like me write about it so much and keep publishing charts like the one below. So, you know, it must count for something, right?

This One Again
Tesla's rate of cash burn accelerated sharply after 2013
Source: Bloomberg, the company
Note: Cash flow from operations less capital expenditure.

Incidentally, that improvement seen in the "Last 12 Months" bar on the right owes a lot to Tesla's inclusion of customer deposits to get in line for the Model 3 -- entirely refundable amounts for a car that is yet to be built. Exclude them and, based on Tesla's earlier disclosure of about 370,000 orders, that bar would be closer to $2 billion. It's worth noting that number wasn't updated in Wednesday's results. Meanwhile, Tesla's guidance of $2.25 billion in capital expenditure in 2016 implies second-half spending will be more than three times what it was in the first.

But no one, it seems, is taking any notice. Because, really, if you were aware a company in which you held shares had burned through $4.5 billion in just the past five years and was headed by someone envisioning "tens of billions" of more spending on a mission that is creeping at the pace of a cheetah, then you'd sort of care by now.

Ahead of the results, Barclays analyst Brian Johnson summed up investors' apparent ennui with a report about Tesla titled: "2Q'16 Earnings Preview, Whatever". He was onto something, too: Judging by the trading volume and price action in Tesla's shares on Wednesday, this was the numbest lead-up to a set of figures in years.

Great Quarter Guyzzzzzzzzzzzzzz
Trading in Tesla's stock was very muted ahead of the latest set of results
Source: Bloomberg, Bloomberg Gadfly analysis
Note: Data reflect the trading day before each set of results. Price variance measures the gap between the high and low price of the day, expressed as a percentage of the closing price. Traded volume reflects shares traded as a percentage of shares outstanding.

The FOMO factor has long helped to keep fundamentals at bay when it comes to Tesla's stock price; no one's buying shares in expectation of a dividend check.

Perhaps this most modern of emotions has intensified this year, as Tesla has upped the ante by laying out an expansive -- if barely sketched -- vision of new cars, trucks, integrated solar power systems, next-generation manufacturing and robo-taxis. Who wouldn't want to be part of that?

Investors training their eyes on the distant horizon tend to be less concerned about short-term inconveniences such as regular requests for more capital, MIA profits and missed targets. Like the song says, though, while you're asking yourself if this is just fantasy, you could get caught in a landslide. There's no escape from reality.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in San Francisco at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net