Tesla Motors (TSLA) has seen a wild ride in 2015, starting the year at $150 per share before soaring to $250 and falling to around $175 just a couple months ago.
TSLA stock has been slowly trending higher lately on optimism that Q2 earnings will deliver impressive results, and that the much-anticipated Tesla “gigafactory” will finally move out of the idea stage and begin taking shape.
But will the momentum in Tesla stock last?
I think it will, and here’s why:
Tesla Stock – What’s Your Time Horizon?
For starters, we have to admit that a cult stock like TSLA can be quite a volatile play — and that if you are a longer-term investor banking on months or years of future growth, the day-to-day gyrations in Tesla stock can make you go nuts.
So if you’re in TSLA stock for the long haul, be patient and try to tune out the noise. The long-term trajectory of Tesla is impressive given its production ramp-up and its plans to roll out a new Model X SUV next year followed by a smaller mass market electric vehicle soon after.
But if you’re a short-term trader, you are at the mercy of sentiment — and news and even rumor can cause big swings overnight.
Reasons for optimism lately include the Gigafactory deal with Panasonic (PC), the long-awaited partner that has seemingly been confirmed in Japanese media reports recently.
“Tesla aims to begin the first phase of construction this fiscal year. The plant would start making lithium-ion cells for Tesla cars in 2017. The automaker is shouldering the cost for the land and buildings.
Panasonic likely will invest 20 billion to 30 billion yen ($194-291 million) initially, taking responsibility for equipping the factory with the machinery to make the battery cells. An official announcement on the partnership will come by the end of this month.
Capacity at the Gigafactory will be added in stages to match demand, with the goal of producing enough battery cells in 2020 to equip 500,000 electric vehicles a year.
The total investment is expected to reach up to $5 billion, and Panasonic’s share could reach $1 billion.”
This arrangement will allow Tesla production to truly ramp up in the years ahead, even as competitors like Toyota (TM), General Motors (GM) or Ford (F) step into the electric vehicle market in earnest as well.
Especially if you’re a long-term investor, this is good news.
Of particular interest to those with a long horizon in TSLA is the fact these high-tech batteries have applications beyond just feeding the Tesla electric vehicle universe. Morgan Stanley recently estimated that the potential market for solar energy storage using these cells could add $2 billion in revenue to Tesla stock.
Tesla Earnings – Will TSLA Stock Pop?
Separately, we have Tesla earnings coming up, with the report expected to come out Thursday after the bell. This will be a big deal, and the focus will be largely on deliveries as a sign of the company’s production capacity and also a proxy for demand.
In Europe in particular, there are concerns that deliveries have hit a ceiling. And Tesla’s China sales are still just getting off the ground, so numbers here will also be important. Overall, Tesla deliveries are predicted to be about 35,000 on the year and about 7,500 on the quarter.
There also might be buzz about the Model X plans, since the Tesla SUV was originally plugged as a late 2014 offering before being pushed back. TSLA stock sentiment very much hinges on the SUV hitting the market in 2015 without further delays.
As for specifics from Tesla earnings, estimates are for a second-quarter net loss of $55 million, deeper than a $31 million a year ago, but without one-time charges the company should post a small adjusted profit. Tesla revenue, on the other hand, should grow impressively to $824 million, compared with sales of $552 million in the second quarter of 2013.
We’ll see if the bulls can remain in control of Tesla stock. After a 500% run in 18 months, many traders are worried if TSLA can keep this up for much longer … and they won’t need much of a miss in Tesla earnings or production numbers to push them into selling.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.