Tesla Inc Stock Is Going to Be Stuck for Awhile so Get out While You Can

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Tesla stock - Tesla Inc Stock Is Going to Be Stuck for Awhile so Get out While You Can

Source: Tesla

The correction in the equities markets did take a toll on Tesla Inc (NASDAQ:TSLA). But the company has certainly staged a nice comeback. Since reaching a low of $310 in early February, Tesla stock has surged to $357.

But hey, this is nothing new. Tesla stock has always been stomach churning. And this will likely not change anytime soon.

However, it is important to keep in mind that the recent fall in TSLA stock was not just about the correction either.  The fact is that there continue to be nagging worries about the underlying fundamentals of the company. Essentially, the production of the Model 3 remains a mind-numbingly complex problem.

During the fourth quarter, Tesla was only able to churn out a measly 1,542 units. To put this into perspective, CEO Elon Musk boasted – back in July – that the production level would be at a much more robust 20,000 per week.

Yes, it was a big-time whiff. Almost embarrassing. But when it comes to Musk, he has a reality distortion field that, well, seems to be an elixir for TSLA stock. He has a knack for making big-time promises, which do not pan out.  But investors don’t seem to mind.

Tesla Forecast Changes

Interestingly, Musk’s latest forecast is much more muted.  He is now calling for 2,500 Model 3s a week by the first quarter and 5,000 a week by the end of Q2.

Actually, there are already signs that these levels will be hit. According to the Wall Street Journal, Tesla has begun contacting some of its reservation holders to configure their vehicles.

But even if TSLA is starting to get back on track, the overall volumes will still be fairly light – at least in terms by the standards of the auto industry.

This is problematic since operators like General Motors Company (NYSE:GM), Nissan Motor Company Ltd (ADR)(OTCMKTS:NSANY), Audi AG (OTCMKTS:AUDVF) and Jaguar will have more time to develop and commercialize their own electric vehicles.

Another issue is that the production complications could be resulting in quality issues. Here’s what InvestorPlace.com’s Lawrence Meyers has had to say:

“If you check out some fan websites, the complaints are rolling in. In fact, the complaints are so bad that it appears at least half the cars have hardware problems, and all have software problems.”

Granted, die-hard Tesla fans may not care much. But as for mainstream customers, they might not be so forgiving. Or they could be turned off by some of the bad buzz when it comes to thinking about making a purchase of a Model 3.

Bottom Line On Tesla Stock

When it comes to Tesla stock, using traditional methods of valuation analysis really does not make sense. It’s kind of like looking at Amazon.com, Inc. (NASDAQ:AMZN). In other words, investors are betting that the company will be transformative across various industries – resulting in tremendous revenues.

But there is a big difference: TSLA has yet to get to mass-market levels. If anything, this looks like it will still take quite some time.

Thus, in the near-term, it could be tough for Tesla stock to break out of its range, which has been $300 to $380 for the past year. So given that the production levels are likely to be soft – and that there appear to be few interesting catalysts – now might not be the best time to jump in, as Tesla stock is not far off from the top of the range.

Tom Taulli is the author of High-Profit IPO StrategiesAll About Commodities and All About Short SellingFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2018/02/tesla-stock-get-out/.

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