Tesla Inc (NASDAQ:TSLA) has been on a tear in 2017, gaining more than 50% year-to-date and more than tripling the performance of the Nasdaq Composite. And that’s even factoring in the 9% dip TSLA stock has suffered in the past month.
One driver (pardon the pun) of the weakness was the fact that Tesla’s deliveries came in at the bottom end of guidance for the second quarter, marking the first-ever sequential decline. While deliveries still grew significantly year-over-year, a company priced as optimistically as TSLA has little room for error.
Now, all eyes should be on the company’s next earnings report.
I realize that most investors think the start of deliveries of the Model 3 is at the top of the list. Tesla finally rolled the first Model 3 off the assembly line and into the hands of Elon Musk — the start to what eventually be a mass shipping to 373,000 customers. But that’s actually had little impact on TSLA stock here in the past few days, despite all of the buildup and hype to this moment.
However, I believe the more important milestone is Aug. 2 — that’s when Tesla earnings for the second quarter will be revealed. And that’s when we will get more visibility into Tesla’s feelings on the initial shipments and what’s next for the company.
The Model 3 and TSLA Stock
For those less familiar, the Model 3 is Tesla’s attempt to bring the electric car to the mass market. Its previous models were high-end vehicles, with the Model S sedan starting at $68,000; the Model 3 prototype was revealed last May and starts at $35,000 before incentives. The car gets 250 miles per charge, too.
There’s been a lot of press about the car, but not as much as you’d think from an investment perspective. Business Insider has harped on things such as the fact that there’s no instrument cluster (speedometer and tachometer), for example.
That’s likely because we need more time to tell whetherthe mass market is going to fly with Tesla.
Many analysts are optimistic; former Apple analyst Gene Munster is just one of a few who has said that Tesla is the new Apple Inc. (NASDAQ:AAPL). Tech analysts Tim Bajarian told Mashable something similar: “They are like Apple in the sense that they have disrupted the auto industry and forced them faster to move to electronic vehicles.”
Still, moving to the mass market is meant to be a sign of maturity — but another sign of maturity is actually turning a profit. Tesla is still expected to lose $1.69 per share this quarter, more than its loss during the same period a year ago. And the full-year loss? $5.69 per share.
Investors are betting big that Tesla will turn things around in the mid- to long-term, but they’re still going to want to see signs of progress, especially now that the Model 3 milestone has passed and the hype around TSLA stock will likely die down.
Keep a close eye on sentiment heading into the earnings report on Aug. 2, and listen closely to management’s reaction to the Model 3’s actual debut.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.