Tesla Inc (NASDAQ:TSLA) is reportedly revving up production of its Model Y crossover, which is slated to come out in 2018. And investors, who were pressing for some good news, wasted no time Tuesday calling shotgun on TSLA stock.
Shares of the California-based electric vehicle company rose almost $12 Tuesday, rising almost 5% after a report from British automotive magazine Autocar claimed Tesla is set to unveil a “Small SUV coming next year.” Production of the Model Y, which is likely to have the same top-hinged doors as the full-size Model X, could start as soon as this year, but would debut no sooner than 2018.
Model Y Hype … or Hope?
The Model Y would be a critical launch for Tesla CEO Elon Musk, who aims to compete with Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) in vehicle mass-market production. And it would certainly give a boost to TSLA stock.
To that end, while it’s only speculation at this point, it makes sense that the Model Y is rumored to be based on the same platform as the Model 3 — Tesla’s new and most-affordable model.
Reports suggest the Model Y is “expected to be slightly more expensive” than the Model 3, which is said to be priced around $35,000. But if “more expensive” still keeps the Model Y at under $45,000, it’s still a win — and a breakthrough for Tesla given the popularity of crossovers throughout the United States.
While Musk’s critics, who have been skeptical of the company’s financial position and its rate of cash burn, will claim that Tesla can’t net a profit at those prices, the question is: Can Tesla make up the difference on volume?
That question can be answered with Tesla’s Gigafactory, which provides tons of reasons for optimism about TSLA stock.
Once completed, the Gigafactory, which is projected to have capacity to manufacture lithium-ion batteries for 500,000 vehicles annually, will accelerate the pace at which Tesla can become profitable. This is because the Gigafactory can boost margins on unit sales of the Model S and Model X.
Musk has promised that the Gigafactory, which is a third completed, would be finished by 2018 — in time to start production on the Model Y. And the Gigafactory would still have tons of room to produce “a future compact SUV and a new kind of pickup truck” as Musk hinted upon in his updated “Master Plan” published on Tesla’s own website this past summer.
Bottom Line for TSLA Stock
Making an investment case for Tesla is not that hard. One only need to take a look into the future and realize Elon Musk is already there waiting not only with autonomous vehicles and connected cars, but also with cleaner/renewable energy, space travel and the Hyperloop.
With TSLA stock closing Wednesday at $255 — down 10% from its 52-week high of $287.39 reached on Feb. 14 — but heading higher in Thursday’s premarket trade, there’s a little room for investors who have waited for a buying opportunity, but not much. Get in before the window shuts.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
