Since I last wrote about Tesla Inc (NASDAQ:TSLA) and Tesla stock on Sept. 27, a lot appears to have happened.
At that time, I reiterated my view that TSLA is a bubble stock. Now, it has announced production delays, with critics charging its cars are being made by hand, the company is continuing to lay off workers and there are short sellers crowing about making $160 million on their bets.
But do you know what has happened to Tesla stock since Sept. 27? Nothing. By the end of trade Oct. 9, Tesla stock was down less than 1%; by the closing bell on Oct. 10, Tesla stock was up 4.3%.
The larger story is both better, and worse, than it appears.
Tesla Stock Will Be Fine
First, making cars is still hard.
It is not surprising that Tesla is falling slightly short of ambitious production targets, but cars are being produced, in quantity, and there are willing buyers for those cars.
Tesla is due to report earnings Nov. 1, with analysts expecting a loss of $2 per share on revenue of $2.97 billion. The company is still on track to approach $12 billion in revenue, against $7 billion last year, a growth rate tech stocks like Alphabet Inc. (NASDAQ:GOOG, GOOGL) can only envy.
For that reason, many Tesla bulls are staying the course. Luke Lango says don’t sweat it and Serge Berger likes Tesla stock for a trade. Morgan Stanley (NYSE:MS) has raised its price target on the stock by 20%.
Tesla is becoming less of a car story and more of an energy story. Revenues from its solar roofs and battery systems is rising faster than its car revenue, and reached 10% of the total in the second quarter. That growth will continue. Demand for such systems is exploding as their costs come down.
You might think from this that I have become a raging Tesla bull. You would be wrong.
The Change Tesla Does Not Need
As cool as electric, self-driving cars seem, there remains a contradiction at the heart of the promise.
If the car is self-driving, the business model changes from personal ownership to corporate ownership, from buying the hardware to buying the service. In that environment, cool design counts less than basic functionality. Tesla is on the wrong side of that future.