The stock chart for Tesla Inc (NASDAQ:TSLA), and the Nasdaq itself, is starting to look like an arching rocket trajectory. Either TSLA stock is about to fall or everything else is catching up, ready for another rise.
My own view on TSLA stock has been clear for months. It’s a bubble stock. Elon Musk is no Jeff Bezos.This doesn’t make Musk or Tesla worthless. They’re just worth less than the hype machine Elon Musk has built tells you they are.
Over the last month both TSLA stock and the larger Nasdaq market, which includes the cloud czars like Amazon.com Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB), has gone nowhere, while more common stocks, like Ford Motor Company (NYSE:F) have shown some life.
The bulls are right in this respect. Tesla has changed the world. Before Elon Musk seized the high end of the roadster market with his electric vehicles, it was assumed that the future belonged to oil and gas. The company smashed that assumption, and TSLA stock showed loads of promise.
Electric cars have fewer moving parts than gasoline-powered cars. They can be better, faster and more stylish than gas models. As more appear on the roads, problems with range and recharging are starting to fade. But Musk didn’t invent the idea of self-driving cars. If anyone is responsible for that, it’s Alphabet Inc. (NASDAQ:GOOGL) and their Waymo unit.
The supercar becomes an instant anachronism in a self-driving era, because the supercar is designed to be driven, to have someone behind the wheel feeling all that power. Self-driving cars are drudges in comparison.
Musk has also helped power the solar revolution, mainly through his huge batteries, which are showing that mass storage of erratic power supplies is possible and that grids can easily be broken into microgrids that are more flexible and self-healing.
Despite this, Tesla hasn’t been able to change one very important thing. It’s still not easy to make a car, in quantity and get it right. Tesla cars continue to show defects, because robots have masters, and those masters are human.
In November, Tesla reportedly delivered 3,590 vehicles, down 18% from a year ago. General Motors Corp. (NYSE:GM), meanwhile, has quietly ramped up production of its Chevy Bolt so that it’s delivering more of them than any Tesla model. Other electric cars, like the Nissan Leaf, are also appearing in American driveways.
As I wrote back in August, mass production is turning out to be Tesla’s “Achilles heel,” its point of vulnerability. Scaling from a few thousand cars to hundreds of thousands was always the key Tesla promise, and TSLA stock followed. It was never going to be as easy to fulfill that promise as Elon Musk claimed.
Tesla next delivers earnings on Jan. 31, with $3.44 billion in revenue expected, up from about $3 billion for the previous quarter and $2.284 billion last Christmas. Bulls will accept continuing losses, and a $3.75 per share loss is expected, in-line with the third quarter, if they are getting that 50% year-on-year growth.
But if Tesla fails to deliver on the top line, the bottom line failures will become obvious, and TSLA stock will fall hard.
Relative success with batteries and solar panels can’t make up for Tesla’s problem with scaling car production. Musk now says he is going to fire one of his roadsters toward Mars as early as next year. If he can’t deliver the goods on car production, it might be best if he’s in it.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and F.