To say the past couple of weeks have been tough ones for Tesla Inc (NASDAQ:TSLA) shareholders doesn’t do the matter justice. TSLA stock has slipped from a late-June peak of $386.99 to its current price of $327.78, a 15% rout that may not be over yet. See, once the market turns on a story stock like Tesla, traders tend to pile on it at and even faster pace than they filed into it.
Thing is, this pullback was bound to happen sooner or later; hype never lasts.
Current owners and prospective buyers of TSLA can take some solace in knowing, however, that in many ways this weakness could serve as a healthy growing pain for the company and the stock. With reality starting to set in, TSLA stock should start to trade more on results and less on assumptions.
And, despite all the recent nay-saying, the future results still look fairly promising.
On the off-chance anyone reading this isn’t already aware, a string of unfortunate news is behind the recent selloff of TSLA stock.
The party started on June 26, when Tesla’s auto showrooms added solar panels to the menu. The company has to sell them somewhere, but investors weren’t sure that this is the ideal venue.
The selling effort didn’t raise eyebrows until July 3, though. That’s when Musk suggested the initial Model 3’s would be rolling off the assembly line before the end of that week, with sales beginning before the end of the month. Some — perhaps most — investors just didn’t believe it, as Musk has been in the habit of overpromising and underdelivering.
Fanning those bearish flames two days later was Q2’s delivery report. The company only shipped 22,000 vehicles, falling short of expectations and prompting Goldman Sachs to lower its price target on TSLA stock to $180 from $190. That was about half of where Tesla stock was priced before Goldman voiced its concern that demand for the Model S was plateauing.
In the meantime, Musk had to add one not-so-minor detail to last quarter’s delivery report: as of the end Q2, 3,500 of those delivered cars weren’t actually delivered, but were only in transit.
It wasn’t so much the numbers that spooked the market. It was the plausibility of what Goldman said that seemed to weigh most on investors’ minds. As it turns out, demand for the Model S is waning. It’s not a stretch to say the same is true of the Model X.
On the other hand, it may not really matter.
Next Chapter of Tesla’s Saga
Just for the record, yes, I’m the same guy who more often than not has a criticism of Tesla. My beef lies more in the fact that traders collectively — and dangerously — put TSLA stock on a pedestal. The result of doing so is suffering a 20% setback like the one we just saw.