Tesla Motors Inc (TSLA) has had another great year, with shares of TSLA up more than 50% since January.
However, Tesla stock could run out of juice in early 2015, based on a combination of unrealistic expectations and the potential for a massive turnover in sentiment.
Don’t get me wrong — I have been enthusiastic about Tesla for some time, and even after the run-up in TSLA stock, I was encouraging investors to buy in early 2014. Long-term, this is a company with staying power, and I expect Tesla electric vehicles to dominate the marketplace for some time.
As an investor, though, it’s worth considering that even good companies can see their share price run into short-term trouble … and that’s what I expect for Tesla stock in 2015.
Here’s why TSLA stock holders may want to take some profits off the table in 2015:
Charts Flashing a Warning: As InvestorPlace technical analyst Serge Berger recently pointed out, the charts are not shaping up nicely for Tesla as it slumps down to touch its 200-day average. A key support level of about $230 per share is being tested, and if TSLA breaks through to the downside we could see some big short-term pain across the next few weeks and months.
Big Auto Cashing Out: Earlier this year, German auto stock Daimler (DDAIF) sold out of its 4% stake in TSLA stock. The fact that the German auto giant behind the Mercedes brand sold out of Tesla stock is telling — particularly since Daimler at one time owned 9% of the EV company and has now exited it altogether, saying direct ownership “is not necessary for our partnership and cooperation.” Another German luxury car maker, Bayerische Motoren W (BAMXY) — known in the states simply as BMW — also indicated recently it is not interested in taking a stake in TSLA. The fact that the biggest luxury car makers in the world are thumbing their nose at Tesla is telling.
Competition Heats Up: Believe it or not, the Tesla Model S isn’t even the best-selling electric vehicle in America. That title belongs to Nissan Motor Co Ltd (NSANY). According to InsideEVs, Nissan has sold more than 27,000 Leafs in 2014. In the No. 2 spot rides General Motors Company (GM) with its Chevrolet Volt moving more than 17,000 autos. Tesla is down there at No. 3 with just under 14,000 sold in the U.S. through the end of November. Especially taken alongside the divestiture of TSLA stock ownership by big German luxury car makers, it’s reasonable to worry about just how much competition will hold Tesla back in the new year even amid a growing market for electric cars.
Production Bottlenecks: Lower-than-expected deliveries in Tesla’s most recent earnings report were a serious concern, driven by continued production concerns. This also came as investors were given news of a delay in deliveries of the company’s much-anticipated Model X electric SUV. Tesla CEO Elon Musk continues to point out the fact that problems are from the supply side and not the demand side, but you have to wonder when this will eventually catch up with Tesla Motors Inc.
Profit Pressures: Also a negative from recent earnings: Tesla’s 2-cent profit was down considerably from Q3 2013′s 12 cents per share. Wall Street has become much more focused on profits lately with high-growth companies, and TSLA stock could feel the ire of investors if it doesn’t turn its profit outlook significantly higher in the quarters ahead. Fiscal 2015 forecasts run the gamut right now, from a massive target of $4.12 in earnings per share to a low of $1.54. We’ll have to see how guidance pans out in 2015 — and if it’s not good enough for some investors, Tesla stock may be in big trouble.
Tesla still is a growth powerhouse, with its most recent quarterly report showing non-GAAP revenue in Q3 of $932 million — a massive 55% jump in sales, and better than forecasts of $889 million in revenue. Clearly there is a lot of upside left for sales in 2015.
But investors need to start wondering about profits, valuation and sentiment. And those items may not be looking great for TSLA stock in 2015.
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.