Like its CEO Elon Musk, Tesla (NASDAQ:TSLA) is as volatile and unpredictable as they come. Tesla’s stock price has gyrated wildly from $245 to $388 over the last 12 months — and Tesla stock is currently closer to the top of that range than the bottom.
Is this electric car maker still the company of the future, or is its future already in the past?
Elon Musk & Co. were hemorrhaging cash earlier this year due to problems with its Model 3 production round. Many thought that Musk would have to sell TSLA stock, as the balance sheet got worse. But management maintained in an April statement that “Tesla does not require an equity or debt raise this year, apart from standard credit lines.”
The irrepressible Musk claims that he lived at the factory while trying to figure out how to get Model 3 production up to 5,000 per week. “There were times when I was working literally 120 hours.” But whatever he did seems to be working: third-quarter profits came in way ahead of expectations at $300 million.
There have been other bumps in the road. Musk sent out a notorious tweetstorm claiming he had “funding secured” for a private equity buyout of Tesla at “$420” per share, which was apparently a marijuana joke. The Securities and Exchange Commission had to rebuke Musk, calling his tweets “false and misleading” and concluding that they “impacted the price of Tesla stock.”
The company had to pay millions in fines and legal fees. Then Tesla’s chief accounting officer, Dave Morton, resigned after just a month on the job.
But what about the plus side?
Tesla has delivered more than 80,000 vehicles in 2018, including more than 56,000 Model 3s. With more than 400,000 Teslas on back order, the revenue stream looks good for the foreseeable future.
As Tesla proves the level of demand for electric cars, competitors are stepping up to get a piece of the pie. Mercedes, a Tesla partner until recently, has launched its all-electric EQ line. Audi has its E-tron, and Jaguar is introducing the I-Pace.
A recent analysis by a securities firm found the company made $14,000 of gross profit per Model 3 in the third quarter, during which it delivered about 55,000 of the sedans. Tesla says that a “mid-range” model, priced around $45,000, is coming soon.
Tesla has been a victim of the ongoing trade wars this year. Sales in China plunged 70% in October compared to a year earlier, mostly due to tariff increases. In July, Beijing raised tariffs on imports of U.S. autos to 40% in retaliation for trade barriers erected by the Trump administration. On Monday, however, TSLA stock is surging as Trump and Chinese President Xi Jinping reached an agreement to lower or halt tariffs on American auto imports.
The eccentric Musk now says he might go live on Mars. Whether he does so or not, Tesla has established its market position well enough to remain a good choice for investors who can withstand some drastic ups and downs along the way.
As of this writing, Thomas Scarlett did not own any of the aforementioned stocks.