Tesla Inc (NASDAQ:TSLA) surged 2.2% in Monday’s trading to nab a yet another fresh all-time high. TSLA stock is on the verge of testing the $350-a-share level, representing a whopping 94% rise from their early December low.
There was no specific catalyst for the move; only a continuation of the momentum bid shareholders have enjoyed.
In fact, if anything, there have been headwinds lately, including the decision last week by President Donald Trump to exit the Paris climate change accord. Tesla CEO Elon Musk derided the decision, which resulted in his resignation from a presidential advisory council. It’s also a decision that raised concerns Trump could roll back the subsidies and taxpayer-funded investments in “green” technology so important to TSLA.
We also have the eagerly anticipated launch of the Model 3 sedan next month. Expectations look set way too high, based on Musk’s on promises. Guidance is for output of 10,000 Model 3s per week by 2018 — or roughly five times the current Model S and Model X production combined.
And there were also embarrassing headlines that AAA was raising premiums on Tesla vehicles by 30% after data showed abnormally high claim rates, adding further upward pressure to overall cost of ownership.
But above all, the bulls continue to ignore the fact the company isn’t profitable, burned through $620 million last quarter, and is losing $13,000 on each car made. All this for a company that is worth more than Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), both companies that make far more vehicles and actually, you know, earn a profit.
Bottom Line on TSLA Stock
I guess this behavior really sums up the current market environment, where hope, tech hype, and momentum trumps fundamentals.
Unless the Model 3 ramp up goes off without a hitch, some reality could soon break the fever dream. Especially with Tesla extending vendor payment terms (a sign of cash hording), a decline in customer deposits on new orders, and with legacy automakers like GM stepping up their game in the EV space (the Chevy Bolt beat Tesla to market with a 200-mile, $30,000 EV).
Tesla will next report results on Aug. 2 after the close. Analysts covering TSLA stock are looking for a loss of $1.71 per share on revenues of $2.6 billion. Second-quarter deliveries will be reported on July 1.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
