Tesla Motors Inc (NASDAQ:TSLA) has been an enigma for the last year or so.
Until Monday, the 12-month return of TSLA stock was positive with shares up about 10% since January 2015. But even the 8% beating TSLA is taking at the time of this writing hardly signals a death knell considering the S&P 500 is down about 3% in the same period.
Of course, given that Tesla stock is up 800% in the last five years and regularly had been making 10% moves higher in a single trading day, it’s natural for some investors to be disappointed.
So what does 2016 hold for TSLA stock?
Unfortunately, a look at the facts on the ground show headwinds mounting against Tesla Motors Inc, and it seems likely that this electric vehicle giant’s fall from grace will continue in the New Year.
Troubles Mount for Tesla
For starters, let’s just talk sentiment. While it’s true that any gain is a good thing in this choppy market, it’s not fair to characterize Tesla as a buy-and-hold investment in the vein of mature tech giants such as Apple Inc. (NASDAQ:AAPL).
For a stock like TSLA, things turn much faster.
For instance, Tesla stock holders are actually looking at a roughly 20% loss since the company’s all-time high last summer. Those who bought at a similar peak in mid-2014 are also down about 20% as shares of the company have been volatile, making little sustained headway in about two years’ time.
Sentiment is a huge deal for TSLA stock — as it is for all momentum names. But beyond the ebb and flow of stock prices alone, Tesla is also facing sentiment headwinds thanks to unfortunate headlines regarding its electric vehicle production.
The troubles for TSLA began back in October, with Tesla cutting production targets thanks to the launch of the Model X SUV complicating manufacturing for its core line of Model S sedans. Furthermore, the Tesla Model X is already two years late, and according to recent news Tesla only delivered a meager 208 electric SUVs in Q4.
That’s not good for TSLA stock holders who have been hoping for ramp in production to justify the extreme valuation of this stock, which boasts a forward price-earnings ratio well over 100.
Now, it’s not all bad. Tesla stock posted record deliveries of its Model S in 2015 with 17,192 units of the electric sedan delivered in Q4. That’s 48% more sequentially and 75% more year-over-year.
However, investors need to balance the realities of growth with the realities of expectations. And while Model S growth is nice, a lot of TSLA stock holders are expecting the Model X SUV to become an equally dominant vehicle quite quickly in 2016 to justify the share price.
Whether Tesla can deliver remains an open question. But judging from its fall from summer highs and last year’s production cuts it’s not looking good, even if TSLA has managed to set a new record.
Investors want more. And TSLA stock will have to deliver or suffer a steep decline across the next few months.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks.Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.