Information and Stock Price Movements the Case of Tesla

By August 17, 2018 Blog

       Tesla attracted such attention with its back to back earnings announcement and the Musk tweet that we wrote a short research paper analyzing the two news releases.  The paper is attached here.

       The main takeaway is that analysis of such events should begin with a reverse engineered discounted cash flow model that relates projections of future cash flows to the current stock price.  Those projections provide a point of reference for evaluating how stock prices should rationally respond to new information.  (The details are explained and illustrated in the paper.)  Using this approach, we conclude that the sharp Tesla price increase on the earnings announcement was not justified and that a buyout at $420 was highly unlikely.