It’s Time to Wait for Lower Prices on Tesla Stock

Call it a “cult stock” or a “controversy stock” if you’d like, but there are few things more often or passionately discussed on financial social media than Tesla (NASDAQ:TSLA) stock. Opinions on TSLA stock are like noses: everybody has one, especially among the financial pundits in the media.

TSLA Stock: It's Time to Wait for Lower Prices on Tesla Before Buying Again

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The recovery of Tesla stock shares from $185 to $245 has some folks jumping on the bandwagon, but I’m not the type of person to follow the crowd, especially when my hard-earned capital is involved. In the case of TSLA stock, I see a number of reasons to remain cautious or even take profits if you’ve got ’em.

Accolades? I’m Not Impressed

Much ado was made over the fresh announcement that Motor Trend had named Tesla’s Model S the “Ultimate Car of the Year,” beating out similar offerings from Ford (NYSE:F) and General Motors (NYSE:GM). The way Motor Trend was gushing about the Model S, you’d think it’s the greatest thing since sliced bread:

“Seven years later, there still isn’t another car that doesn’t require a start button or key … The idea that a car would recognize your phone as you approached, unlock, boot up its computers, and be ready to operate and drive the moment you sat down and closed the door is still cutting-edge today.”

I tend to view this effusiveness as a way to sell copies of Motor Trend, not an instance of sterling journalism. With comparable vehicles from Ford, General Motors and Nio (NYSE:NIO), Motor Trend is behaving as if Tesla were still the only leading-edge electric vehicle manufacturer around, which is absolutely not the case in 2019.

A Matter of Trust

Overblown superlatives aside, the fact remains that if a company doesn’t have their target demographic’s trust, then they’ve really got nothing at all. And it seems that Tesla has broken that bond of trust, as evidenced by AMCI’s newly released 2019 Trusted Automotive Brand Study (TABS).

As reported in the study, Tesla is now the third least trusted luxury automobile brand. This is significant because, as the AMCI study stated, trust accounts for more than 50% of a consumer’s decision to repurchase or recommend an automotive brand or its dealers.

Switching to a dealer-less business model likely played a part in this precipitous decline in consumer trust. It appears that Elon Musk’s bold move away from the franchise paradigm may have backfired when it comes to building and maintaining trust: as AMCI Global Chief Strategy Officer put it, “Franchised dealers can do an excellent job of building trust if they use the right standards and practices.”

Analysts Aren’t Buying It

Hype tends to hit retail investors the hardest, but analysts aren’t prepared to join Team Tesla stock just yet — and frankly, I can’t blame them for their skepticism. Credit Suisse analyst Dan Levy, for instance, has aptly pointed out that TSLA “still needs to work its way through another cut to the U.S. EV tax credit” — a point often glossed over by overenthusiastic retail Tesla bulls.

Also bearish is Bank of America analyst John Murphy, who explained that TSLA’s roll-out of the lower-priced Model 3 “will likely pressure margins, profits, and cash flow.” And UBS analyst Colin Langan, not to be deterred by the highly vaunted TSLA second-quarter earnings results, reported that “the Q2 delivery beat does not change our cautious view on Q2 earnings.”

The Bottom Line on TSLA Stock

When it comes to cutting-edge electric vehicles, Tesla isn’t the only player in the game anymore and there are plenty of viable investment alternatives to TSLA stock.

Frankly, I wouldn’t blame anyone currently in the green on his or her TSLA stock position for shedding some shares now in anticipation of buying them back if and when the price revisits the sub-$200 level.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

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