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Jim Cramer's One Issue With Tesla's Earnings Report

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Jim Cramer's One Issue With Tesla's Earnings Report
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Shares of Tesla Inc (NASDAQ: TSLA) gained more than 6 percent Thursday as investors expressed their pleasure with the company's earnings report Wednesday. But CNBC's Jim Cramer discussed a major "issue" with Tesla's stock, which may give reason for investors to reconsider or at the very least keep in mind.

Tesla's stock appreciation is mostly attributed to "promises" that its CEO Elon Musk makes, Cramer explained. For instance, during the earnings report, he said investors should "absolutely have zero concern" over its promise to achieve a 10,000-unit production rate of the Model 3 sedan per week by the end of next year.

Unfortunately, Musk has a history of over-promising and under-delivering, but investors don't seem to care — old promises that aren't achieved are merely replaced with newer promises. By contrast, Amazon.com, Inc. (NASDAQ: AMZN)'s CEO Jeff Bezos doesn't promise anything — he "just delivers."

If anything, Tesla's earnings report and conference calls are merely "pep talks" for shareholders, Cramer added. Moreover, just like Netflix, Inc. (NASDAQ: NFLX)'s CEO Reed Hastings said during his conference call that enormous cash burns are a sign of success, Tesla's investors are thinking the same logic applies.

"It means success," Cramer half-jokingly said. "It's the smell of success. It's like they burn down a factory to save it."

Related Links:

Tesla Still A Top Pick On Q2 Beat, Strong Model Reviews

Tesla Reports Strong Q2 Earnings, Expects Positive Gross Margins On Model 3

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Image Credit:By Steve Jurvetson [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

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