TSLA Stock – Gutsy Traders Can Make a Ton on Tesla Here

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tsla stock - TSLA Stock – Gutsy Traders Can Make a Ton on Tesla Here

The Falcon Wing rear doors of the Tesla Model X

Source: Tesla Motors

Tesla Motors Inc (TSLA) has been in a tailspin lately, with TSLA stock down more than 15% from its July highs. The biggest reason for the slump is the production bottleneck for the electric vehicle manufacturer, with Tesla stock warning that its full-year deliveries of vehicles will be weaker than forecast.

TSLA Stock - Gutsy Traders Can Make a Ton on Tesla HereTo make matters worse, a recent report has highlighted the fact that TSLA stock is effectively operating at a loss, with Tesla losing about $4,000 on each vehicle sold.

With these headlines, it’s not surprising to see Tesla stock pull back. But gutsy traders may be able to jump into a big buying opportunity here based on the long-term hopes of this electric vehicle company and its iconic CEO, Elon Musk.

3 Reason TSLA Stock Is Misunderstood

In my mind, there are three big reasons why Tesla is a misunderstood company, and why TSLA stock has plenty of upside in the medium to long term, even if it is caught in a small downdraft right now.

Here they are:

Production Woes Were Planned: For starters, the idea of bottlenecks in production shouldn’t surprise savvy TSLA investors. Part of the problem is that Tesla just completed a planned factory shutdown so production could begin on the highly anticipated Model X SUV. You can’t just crank out Model S sedans on Monday and then switch to the Model X on Tuesday — planning and preparation is necessary. Furthermore, the first batch of Tesla vehicles on this new line are actually not for sale — they’re simply prototypes to ensure quality control before being released to the public at large. These steps back are frustrating to some, but the manufacturing process is complicated and Tesla is doing the best it can.

Demand Is Insane: And let’s not forget that part of the reason things are tough for TSLA stock investors is because expectations are so high — because the public is bonkers for Tesla vehicles. Consider that in its latest earnings report, Tesla showed a staggering $273 million in customer deposits. Even if the typical customer puts down a hefty $10,000 on their car, when in fact most numbers show about $2,500 to $5,000 is the norm, that’s an amazing 27,300 vehicles that are technically already sold! Tesla is plotting as few as 50,000 vehicles delivered this year after its lowered targets, so by that math the company has about half a year of business already booked.

The TSLA Story DOES Matter: At the end of the day, I’m an old-school investor who does believe that profits matter and that no company can survive forever on hopes and dreams. But while the cash burn of Tesla is concerning, the company is not deeply in the red. It is well capitalized with $1.1 billion in cash on the books, and CEO Elon Musk is not opposed of raising more capital via a secondary offering if necessary to keep production moving higher. That creates short-term pain, yes, but the long-term success story of Tesla is the real deal. If you think this company is one of those doomed tech companies we’ll laugh about in five years … you’re not paying attention.

There is admittedly pain after this drop in TSLA stock and a comparatively weak earnings report. But the Model X could unlock big sales and demand, and reverse that sentiment.

Momentum stocks don’t go up forever, and we could be witnessing a contraction in Tesla that may last for a while longer. But gutsy traders with long-term goals might want to consider staking out a position in this electric vehicle player during the downturn based on big back orders, big plans to ramp production and the general idea that you can’t keep TSLA and Elon Musk down for long.

After all, all automakers have hit a soft patch in 2015 — including Ford (F) and General Motors (GM) — despite the fact that overall auto sales are strong and consumers are getting their mojo back.

Tesla will be fine.

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

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/tsla-stock-gutsy-traders-can-make-a-ton-on-tesla-here/.

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