Tesla Motors Inc (NASDAQ:TSLA) and CEO Elon Musk are known for high-profile, headline-grabbing company announcements. However, this week Tesla made a very low-key announcement that could have major near-term implications for TSLA stock.
TSLA Stock Has a New Catalyst
On Monday, Tesla Motors announced that it will begin charging customers who use its nationwide network of 4,600 Supercharger stations. Up until this point, all TSLA customers have had free unlimited access to the Supercharger stations. However, starting on Jan. 1, 2017, new Tesla customers will have to pay “a small fee” for any annual Supercharger station charging in excess of 400 kWh.
According to Tesla, 400 kWh of charge is good for about 1,000 miles of driving.
What’s the big deal? That Jan. 1 deadline is the big deal.
Maybe 1,000 free miles per year sounds like plenty, but it’s not. According to the U.S. Department of Transportation, the average American drives over 13,400 miles per year. That means that starting on Jan. 1, 2017, a lot of TSLA drivers will be paying a lot of money for electricity.
TSLA Stock Impact
If you take Tesla at its word, the fees for electricity will be “less than the price of filling up a comparable gas car.” But still, why pay for electricity when you can get it for free?
That’s the question that all customers considering buying a Tesla Motors automobile any time in the next six months are now asking themselves. If they buy before January 1, they qualify for free unlimited charging. If they wait until Q1 of 2017, they will be paying electricity.
Maybe you can see where I’m going with this. In the business world, what Tesla Motors is doing is called “pulling forward” sales. Buyers that would normally buy in January or February now feel they will be getting a better deal if they buy before Jan. 1.
This news potentially creates a major near-term catalyst for TSLA stock. Tesla stock trades at an exceptionally high valuation compared to auto industry rivals Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). That premium valuation comes because TSLA is a “story stock.” Tesla stock is valued more on the idea of what the company could eventually become than what it is today.
In the meantime, Tesla Motors’ share price remains elevated only if the story continues to go as planned.
How to Trade Tesla Stock
Story stocks trade much more in response to growth metrics than earnings numbers. A big quarterly sales beat is a sign to the market that Tesla’s story is ahead of schedule.
TSLA stock didn’t immediately react much to the free charging deadline announcement. With the presidential election taking up most of the media coverage, it may now quietly be set up for a big Q4 sales beat. If enough potential 2017 buyers decide to jump in ahead of the Jan. 1 deadline, Q4 numbers could be huge.
For extremely long-term TSLA stock investors, this news is probably only modestly bullish. Tesla Motors is testing the waters on charging its customers for electricity. It can choose to expand its charges and up its prices as it sees fit down the line.
However, it’s important to remember that any potential Q4 strength may be coming at the expense of 2017 sales. If TSLA stock makes a big jump following a Q4 sales beat, it might be a good idea to dump or short the stock ahead of Q1 earnings due out in late April 2017.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
