Buy the rumor, sell the news was the order of the day for Tesla Motors Inc (NASDAQ:TSLA) after a hotly anticipated product announcement failed to live up to the expectations baked into TSLA stock.
Again.
It wasn’t the most exciting announcement, that’s for sure. Still, the introduction of bigger batteries for the Model S and Model X cars that have Ludicrous modes is important from a competitive standpoint, if not all that sexy.
However, Tesla stock gained as much as 2.5% in intraday trading after CEO Elon Musk made an announcement that a reveal was coming. Once the news arrived, shares gave up most of that upside.
Not a happy series of events when you consider TSLA is off 6% for the year-to-date amid a market that’s up 7% and regularly resetting all-time highs.
What’s unfortunate is that Tesla’s up-and-down today is taking away from what is a meaningful piece of news out of the electric vehicle maker.
TSLA Goes the Distance
The 100 kWh battery option will greatly extend the range of select Tesla vehicles. That’s important because one of the biggest hurdles that electric cars face is shorter range compared with gas powered vehicles.
For the Model S, the new battery option will extend the range to 315 miles. No other electric car has ever been able to go that far on a single charge. The Model X with a 100 kWh battery will extend its range to 289 miles. Prior to these changes, the TSLA car with the greatest range was the Model S P90D, at 270 miles.
As is usual with TSLA, the new technology doesn’t come cheap. Current owners of a Model S or Model X P90D Ludicrous can upgrade to the 100 kWh option for $20,000. New customers and those still awaiting the delivery of their vehicles can order the upgrade for $10,000.
Speaking of which, it was the “D” that served as a reminder that Musk tweets can have negative consequences for investors looking too deeply into cryptic tweets. Back in October 2014, Elon Musk sent out a tweet — “About time to unveil the D and something else” — that sent TSLA stock up some 7%.
The revelation that the “D” wasn’t in fact a new Model D car, but simply a variant of the Model S (the Model S P85D) sent investors into a selling frenzy, hacking into all those gains and a little extra.
Similarly, a July 10 tweet about a second “master plan” sent Tesla shares higher, but the July 20 reveal of “Part Deux” sent shares back lower.
So it should go without saying that you should never buy TSLA stock — or any security for that matter — in anticipation of an announcement.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
