Few companies can match Tesla Inc’s (NASDAQ:TSLA) innovative prowess. Just look at SpaceX, where CEO Elon Musk recently decided to launch a Tesla Roadster into orbit, apparently because he can. Stunts like this solidified that Musk is one of our generation’s brightest minds. But as for the skyrocketing Tesla stock? I’m afraid that is a whole different story.
On a surface level, everything seems fine. Year-to-date, Tesla’s stock price is up 12%, a fairly remarkable achievement considering pensiveness in the broader markets. Just as importantly, Tesla’s resilience sends a powerful signal to its competitors in the electric vehicle (EV) sector.
Comparatively, rival Toyota Motor Corp (ADR) (NYSE:TM) is up only 6% YTD, while General Motors Company (NYSE:GM) is a hair below parity for the year.
That being said, Tesla stock has hardly moved at all since the beginning of June. That has caused many long-term shareholders to worry that the extraordinary bull run has subsided. Practically speaking, technology shares have two directions: you’re either making a profit for stakeholders, or you’re losing them money.
Obviously, with its string of never-ending negative earnings, Tesla doesn’t pay out dividends. Therefore, the TSLA stock price has to move higher for investors to stay interested. Consistently losing money is not an option, obviously, but neither is standing still.
Unfortunately, Tesla stock has been doing quite a bit of nothing, and I mean that literally. We’ve all seen shares gyrate back and forth, but the net result over time is a dead heat. Adding to the concerns is all the unconventional stuff that the company does.
It’s nice to think that a roadster may one day crash land on Mars, but stakeholders want something more terrestrial. So when will TSLA deliver the goods?
Tesla Will Get Back on Track
The problems negatively impacting TSLA stock revolve around its EV business. Say what you want about Musk’s superhuman brilliance, the painful reality is that his company is a sad shell of itself without EVs. However, with Tesla falling behind on its automobile production goals, doubts cloud the organization.
Our own Dana Blankenhorn summed up the challenge pointedly, noting that the automaker’s money maker isn’t bringing home the bacon. He writes:
“Tesla brought in $9.64 billion of automotive revenue during 2017 — $8.5 billion from sales and $1.1 billion from leases. The entire gross profit, $2.22 billion and more, was consumed by sales, general and administrative expenses of $2.476 billion. Research costs of nearly $1.4 billion went on top of that. Overall the company lost $675 million, $4.01 per share of TSLA stock.”
Blankenhorn has a generally dim view on Tesla stock, and I can understand that. However, I genuinely believe that the company will get its act together. Once it does, TSLA shares will again light up Wall Street.
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It’s an easy equation: hit the lofty production numbers, and the Tesla stock price will follow. Actually getting there, of course, is a difficult task. At the same time, the opportunity is wide open. No one can stop Tesla but itself.
No Reason to Panic
If TSLA was a rudderless organization that was past its prime, I’d consider any consolidation phase as a dumping opportunity. That’s just not the case here. It’s a global powerhouse brand levered toward a growing and increasingly vital industry.
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In my opinion, doubting TSLA stock cheapens what the entire organization is all about. If we admire a man for launching a car toward another planet, we should at least give him the time he needs to right his more mundane auto production schedule.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
