Now is a weird time for Tesla Motors (TSLA) bulls.
TSLA stock kicked off the first two months of 2014 in a dead sprint, climbing by as much as 70% as of early March. And while I made Tesla stock my pick in the Best Stocks for 2014 contest, I never imagined TSLA would be on pace to double by Easter.
But that’s OK. It’s not going to.
After peaking at nearly $255 on March 4, TSLA stock has slammed the brakes hard, slumping roughly 15% while the S&P 500 has managed to at least stay level in that time.
Tesla stock holders (and prospective buyers) now find themselves in an interesting position of sitting on impressive year-to-date (40%) and 52-week gains (400%) … but also staring straight in the face of some serious recent weakness.
And it pains me to say that the recent weakness doesn’t seem to be over just yet.
What Has Been Weighing on TSLA Stock?
The short, sucky answer? A lot:
- Plans for a “Gigafactory” meant to produce millions of electric-car batteries ginned up excitement, but also raised eyebrows. The Wall Street Journal reported on skepticism in the space — including from heads at Volkswagen (VLKAY) and battery maker Highpower International (HPJ). Now, even planned investment partner Panasonic (PC) now sounds iffy on the project, with company Kazuhiro Tsuga saying “the investment risk is definitely larger.” Not good.
- There also was Tesla’s direct sales snafu. New Jersey Gov. Chris Christie huffed and puffed and (on March 11) successfully blew down Tesla’s direct sales model, with the Motor Vehicle Commission approving a measure to enforce an already-existing ban on direct sales. On the flip side, Tesla has scored victories in New York and Ohio in the past month, and is making progress in Arizona (which has a little incentive on the board).
- Production of the Model X has been pushed further back, to 2015. Musk’s reasons — mostly having to do with focusing on bolstering Model S sales — are valid, but that doesn’t really soften the blow of a longer wait for the much-anticipated addition to Tesla’s line.
- To address the issue of battery fires in the Model S, TSLA added titanium shields and aluminum deflector plates to new vehicles and offered to install them for free in all its existing cars. Tesla’s margins are excellent, and there’s no hard number on the cost impact of the fix, but titanium ain’t cheap. This definitely isn’t going to add to Tesla’s bottom line.
I won’t belabor you with my bullish position on TSLA stock, but if you want, you can see it here. In short, Musk is a genius; Tesla products are quality and appeal to (and are priced for) the all-important luxury segment; and just given size and scale, TSLA has oh-so-much room to grow.