Tesla stock fell after stellar earnings. Here are some reasons why.

Electric-vehicle maker Tesla forecast earnings on Wednesday evening. Its stock initially started after hours of trading, but closed down 5% on Thursday.

Tesla stock (ticker: TSLA) can be difficult to detect, but there are some reasons for its weak performance on Thursday.

Wall Street was impressed with the results, but it was not. Tesla’s “valuation almost implies world domination”, Bernstein analyst Tony Saconaghy wrote in a Wednesday research report, “good but not great.”

This is a fine line. Tesla is now the world’s most valuable auto manufacturer. Sonkoghi’s sentiment echoed around Wall Street, as analysts thought it was a great quarter but asked: Where does the stock go from here?

Tesla stock caught an upgrade and a downgrade on Thursday. New Street Research analyst and Tesla bull Pierre Ferragu stopped buying shares. Cowen Analyst and Tesla upgraded Jeffrey Osborne’s shares from hold to sale. Eventually, they both ended up at the same lukewarm rating.

Stock offer

A second quarter profit was essentially the final step in qualifying Tesla stock for inclusion in the S&P 500. This is good news for bulls as it generates demand for Tesla stock from index funds and others that closely track the S&P 500. But it is possible that Tesla will help the stock facilitate a smooth change in the index. Stock sales reduce any buying pressure, reducing volatility and perhaps taking away the opportunity for a stock price spike.

Income quality

Tesla sells regulatory credits generated by producing more than its fair share of zero emission vehicles. It has always sold them and will be for years to come. But it sold out in the second quarter. Beer thinks the quarter was of lower quality in relation to income.

Whether or not this is true, the sentiment depends on whether a person is a Tesla bull or a bear to begin with.

GLJ analyst Gordon Johnson is Tesla Bear and he feels the company outpaced emissions sales from future periods to generate the necessary profits for S&P inclusion. What’s more, he thinks other auto makers will need to buy less credit in the coming years as other EV programs ramp up. He sees the cash source drying up in the future.

Johnson’s rates are equal to Tesla’s share of SAIL and a much lower $ 87 price target for the shares. According to FactSet, the average analyst price target for Tesla stock is $ 1,165 per share.

And stock is very high

It may go without saying, but Tesla shares have risen in the past year, crushing nearly 475% and comparable returns to the S&P 500 and Dow Jones Industrial Average Automotive Peer.

But after two previous strong earnings reports, the stock has now declined. Investors expect a lot from Tesla these days.

The bottom line was not very good on Thursday.

Write Al Root at [email protected]