Tesla Stock Is in Trouble – Sell TSLA Now!

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TSLA - Tesla Stock Is in Trouble – Sell TSLA Now!

Source: Tesla website

Tesla Motors Inc (TSLA) has significantly outperformed in 2014, with more than 40% gains since January to trounce the roughly 11% gains for the S&P 500 in the same period.

Tesla Stock Is in Trouble - Sell TSLA Now!However, Tesla stock has been losing speed at a rapid clip, down more than 25% from its 52-week high set back in September. And based on recent headlines, there are serious concerns that TSLA stock could continue to crash in 2015.

It’s a bitter pill to swallow for Tesla bulls, considering the tremendous long-term performance of this stock; TSLA is up more than 1,000% since its 2010 IPO. But it’s important to judge this electric vehicle manufacturer based on the latest facts regardless of your previous enthusiasm — a rule that applies to me, too, considering I was encouraging investors to buy TSLA stock in early 2014 and have only recently changed my tune.

But the best investment strategies move when facts change. And here are the facts working against Tesla right now:

Tesla Stock Faces Production and Pricing Problems

Lower-than-expected deliveries in Tesla’s most recent earnings report were a serious concern for investors, has have weighed on TSLA stock lately as a result. The challenges are not demand-based, of course, since consumers are still quite enthusiastic for the company’s electric vehicles … but production woes have caused limits on the output for Tesla’s flagship Model S sedan and even delayed the highly anticipated debut of the Tesla Model X electric SUV.

And according to some analysts, those production challenges will continue. Take this from a recent CNNMoney report:

“One of Tesla Motors’ biggest fans on Wall Street has cut drastically sales expectations for the electric car maker, saying that low oil prices could be a problem for the company’s future growth.

Adam Jonas, auto analyst with Morgan Stanley — and long a bull on Tesla — published a note Wednesday forecasting that Tesla will only be able to sell just under 300,000 cars by 2020. That’s far short of the 500,000 cars that Tesla is predicting it will sell by that date.”

Worse, Jones goes on to state that he predicts demand will slump as well given indications that Tesla’s “mass market” electric car will actually be priced at closer to $60,000 — hardly making it an affordable entry-level vehicle.

This one-two punch of production problems and pricing challenges adds up to a headwind for growth.

Let’s not forget that the Tesla Model S isn’t even the best-selling electric vehicle in America. That title belongs to Nissan Motor Co Ltd (ADR) (NSANY) with more than 27,000 Leafs sold in 2014 through November — at prices that start as low as $30,000 or so.

And in the No. 2 spot rides General Motors Company (GM) with its Chevrolet Volt moving more than 17,000 autos, at a price of about $35,000.

Tesla is down there at No. 3 with just under 14,000 sold in the U.S. through the end of November, and with no immediate plans to go downmarket there is a serious risk that it will fall behind the competition of bigger automakers. And when you consider the production bottlenecks on its high-end Model S and Model X … well, it doesn’t look good.

I wrote an in-depth piece about why Tesla stock is a sell for 2015 a few weeks back… but this latest report from Morgan Stanley sums up the bear case pretty well: little upside to existing production, and a lack of a model in the lower-priced vehicle market.

Throw in Tesla’s recent soft share price and high earnings multiple, and it’s a recipe for underperformance.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP


Article printed from InvestorPlace Media, https://investorplace.com/2014/12/tesla-stock-tsla-production/.

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