Tesla (NASDAQ:TSLA) investors have endured a bumpy ride over the past few years as the stock rose and fell at the drop of a hat. On one hand, TSLA stock benefited from optimism regarding the public’s growing interest in electric vehicles and advancements in autonomous driving. However, the firm continuously disappointed by not living up to expectations, leading many to start doubting the validity of CEO Elon Musk’s sometimes outlandish claims. 

Now, in the wake of yet another disappointing earnings announcement, investors are buying the dip in hopes of picking up a groundbreaking company at bargain bin prices.

Tesla stock gained 3.39% on Monday as traders snapped up the beaten down stock, which fell 14% following its second quarter results. 

The Argument Against TSLA Stock

Analysts are divided on whether Tesla is a worthwhile investment. Of the 34 analysts covering TSLA, roughly a third have given it a buy or overweight rating, one third recommend investors hold, and the final third rated the stock with an underweight or sell rating.

It’s worth noting that many investors believe a “hold” rating in itself is essentially a way for analysts to get out of committing to a positive or negative rating. That school of thought suggests that a hold rating means analysts really aren’t sure what direction the stock will move. From that perspective, 22 of 33 analysts covering TSLA stock are either negative or unsure about the direction Tesla is headed over the next six to 12 months.

While a hold rating is also a way for analysts to signal that a stock is likely to move in tandem with its peers or the market as a whole, I wouldn’t be surprised to find that the hold calls for Tesla stock are a nod to the stock’s overwhelming uncertainty. 

Tesla’s second quarter results only added to worries about the firm’s future — especially after Musk announced that co-founder J.B. Straubel is leaving his role as CTO and becoming an advisor. Straubel has been an integral part of Tesla’s business. As Adam Jonas from Morgan Stanley pointed out, “Investors may question what motivated the 15-year Tesla vet to give up direct operational responsibility at this time.”

Tesla’s Profitability Questionable

Plus there’s the fact that Elon Musk pushed back his expectations for TSLA’s ability to turn a profit. During the second quarter earnings call, Musk admitted his prediction that the firm would become profitable by the third quarter was likely too ambitious, and that investors should instead expect to see profits in the fourth quarter. 

Can we trust Musk’s outlook? Maybe not. Yes, deliveries in the second quarter were encouraging, and if they continue on that trend, fourth quarter profitability looks attainable. However, many are worried that federal tax credits will have pushed the majority of demand into the first half of the year, which could pull down deliveries in the back half of 2019 and keep the firm from meeting its targets. 

Without elevated delivery numbers, Tesla stock investors have very little to cling on to. Tesla has had to cut its prices in order to make its vehicles affordable to the public, which has put pressure on margins. As InvestorPlace’s Vince Martin pointed out, the jury is still out on whether the Model 3 is profitable, but the case against it is strengthening each time TSLA cuts its price. 

The Bottom Line on Tesla Stock

Tesla does have some potential growth catalysts on the horizon — the firm is about to complete a new Chinese factory and new Model Y vehicles are due out in 2020. Autonomous driving, once perfected, could add significantly to the value of Tesla vehicles that already have the functionality built in.

While all of that is worth considering, it doesn’t answer the underlying question plaguing Tesla stock — how is the company going to turn a profit? From what we have seen so far, the price point at which Tesla must sell its vehicles is too low to generate a profit. The departure of Tesla’s CFO Deepak Ahuja earlier this year followed by Straubel last week suggests that management knows the current strategy is flawed. This leads me to believe that there are quite a few more bumps in the road ahead before TSLA stock starts looking like a solid investment. 

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