Tesla Inc (NASDAQ:TSLA) frustrated a lot of short sellers earlier this year as it zoomed more than 80% higher through late June. But over the past few weeks, the tide has changed, and the bear crowd — still substantial at nearly 30% of available TSLA stock — is starting to show some teeth. Shares are off roughly 15% since their June highs.
Will exuberance return, or will the Tesla short crowd keep driving the stock into the ground until and through the Model 3 release?
Here are a few things to factor in:
Executive Departure
Tesla said on June 21 that Autopilot software chief Chris Lattner left the company — one of a few executive departures over the past couple years.
The details of the lack of fit between Lattner and Tesla are not publicly known. CEO Elon Musk may have wanted LiDAR (or Light Detection And Ranging) technology implemented and working alongside Tesla autopilot. Ford Motor Company (NYSE:F) and Baidu Inc (ADR) (NASDAQ:BIDU) are both investing in this, having invested $150 million in Velodyne. Realistically, until prices for LiDAR falls, self-driving cars cannot use the technology commercially just yet.
Achieving full autonomy may need more development time and resources than was available for Lattner. In realizing the unrealistic timeframe imposed on him, Lattner decided to move on than to work under such expectations.
Alphabet Inc (NASDAQ:GOOGL) is years ahead with its self-driving solution; investors will have to decide if Tesla is anywhere near it. Competitors are at or ahead of Tesla, too, as competition worsens; 44 companies are working on autonomous vehicles.
Many technology software companies are committed to investing in this market in one way or another. For instance, Apple Inc. (NASDAQ:AAPL) and BlackBerry Limited (NASDAQ:BBRY) — the latter of which is propelling car tech through its QNX division — are working on autonomous driving software solutions.
Tesla Vindicated, Then Slighted
There’s good news, of course. A U.S. government report released on Jun. 20 vindicated Tesla from fault in the case of a driver killed while using Tesla’s semi-autonomous driving system who ignored the car’s warnings about driving without his hands on the wheel.
The news should help set consumer expectations on what ADAS (autonomous driving assistance systems) can and cannot do.
The NHTSA’s five-star rating for Tesla’s Model X, on June 13, would seem to underline Tesla’s commitment to safety. No other SUV has such a high rating. Tesla credits the high level of safety to the all-electric power source, along with a fortified battery pack positioned such that it lowers the probability the SUV will roll-over on the road.
However, just a few days ago, TSLA was sent into bear-market territory after the Insurance Institute of Highway Safety failed to present the Model S with any of its highest safety awards. The sticking point was an “acceptable” rating in the small overlap front test that resulted in the dummy slamming its head against the steering wheel through the airbag.
Supercharger Network
Tesla’s ambition to lead the EV market depends on the build out of the supercharger network throughout North America. If the company successfully negotiates with other carmakers in having them join the network, it would save everyone money.
Standardizing the technology and opening its available to any EV on the market would benefit both Tesla and other automakers.
There is a hangup for adoption, though; current Tesla car owners may charge their vehicles at no cost, but TSLA is ending that program for new buyers.
Once Tesla 3 puts EVs in the mainstream, the high demand for charging could put a strain on the network. Crowding at the charging stations could undermine the limits of sharing the supercharger network to other car makers.
Still, technology will only get better, cutting the charging time. Consider this a wash.
Tesla 3 Release
Tesla’s Model 3 deliveries, expected to begin within days, may justify its lofty valuations. The company has unveiled the final designs for the mainstream-targeted automobile, which nearly 400,000 customers have pre-ordered.
- Driving range of 215 miles
- Base price of $35,000
- $7,500 available tax credit (though this is only good for the first 200,000 cars sold)
- A minimum of four color choices to choose from
- Full ADAS capabilities, powered with Nvidia Corporation’s (NASDAQ:NVDA) PX2 supercomputer
How much of the ramp in TSLA stock this year has been a product of Model 3 hype, and how much of that froth was swiped away amid a couple weeks’ worth of negative headlines?
That much is hard to tell.
But if Tesla has been flying high on Model 3 hype, it’s likelier that Tesla shares will head higher in the coming weeks and even months until more hard data comes out on unit deliveries. Pre-order figures have been known for months, so that knowledge is well-baked-in.
TSLA stock has cooled off of late, but optimism appears to have taken hold once more over the past few days. As Elon Musk continues to reshape the automotive market, investors will gladly continue driving shares higher over the long haul.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities. Lau offers a Marketplace Research service.
