The juggernaut electric carmaker Tesla Motors (TSLA) is not only an auto manufacturer; it’s also a huge technology play. CEO Elon Musk has proven himself to be the kind of leader that inspires confidence, and more importantly big profits, for TSLA stock investors. That confidence, alongside the impressive revenue and earnings Tesla have brought in, has driven TSLA stock to an 900% gain over the past five years. So far in 2014, TSLA stock is up nearly 28%, and that’s despite a recent slip of 25% since the stock hit its most recent high on March 4.
The latest round of selling in TSLA stock came despite what I think was a strong Q1 top- and bottom-line that beat expectations. Still, Wall Street took the opportunity to “sell the news” in TSLA stock, and the result was a steep drop in the shares on May 8, one day after the company’s earnings reveal.
I suspect TSLA stock is one of those situations where, in order to keep jolting higher, Tesla has to come in with outrageously impressive revenue and earnings. Simply coming in with good numbers is likely going to be met with more sell-the-news trade, and that’s certainly understandable after such a massive run in the stock.
But if you are looking for a true champion that dominates a niche market, and one whose market penetration is just now getting started, then there is no denying the ability of Tesla to come roaring back to victory.
Expansion in China is just one of the near-term catalysts that could give TSLA stock another major spark, but then there’s the planned release of the company’s Model X, as well as a lower-priced version of the Model S sedan. Production of these vehicles will be possible thanks to Tesla’s new battery “Gigafactory,” which it plans to invest about $4 million to $5 million to create.
The bottom line here is that Tesla, and TSLA stock, will almost certainly be much higher in the years ahead than it is right now. That means the latest 25% pullback is your opportunity to take this profitable ride at a discount.
As of this writing, Jim Woods was long AMZN, TSLA.