Tesla (NASDAQ:TSLA) stock has been volatile, and under the circumstances, could we expect anything else? TSLA stock fell more than 50% from its highs at one point, but the rebound has been robust.
General Motors (NYSE:GM) and Ford (NYSE:F) have bounced “just” 51% and 25% from the March lows, respectively. That’s dwarfed by Tesla’s bounce of more than 108%. Shares continue to boom higher as investors keep gobbling up the expensive shares of the world’s most prolific electric vehicle (EV) producer.
Some investors may opt for a dip to buy and it’s difficult to fault them for that. After all, shares have more than doubled from the recent low. But long term, TSLA stock still looks attractive.
TSLA Stock vs. Coronavirus
When the novel coronavirus triggered the stock market selloff in February, Tesla shares were buried. Traditionally, no one wants to own automotive stocks during a recession. These are cyclical businesses with a lot of overhead. These fixed costs make producing vehicles expensive and cumbersome. Without pricing power or demand during economic hardships, these businesses suffer.
One could argue that Tesla doesn’t have the same headwinds as Ford, GM, Fiat Chrysler (NYSE:FCAU) and other producers. However, it too has fixed costs and overheads, and a prolonged economic contraction would not be good for business.
However, the coronavirus presents an atypical circumstance, and in typical Tesla fashion, it’s reacting differently than its peers.
GM and Ford reported disappointing first-quarter sales results. However, Tesla crushed expectations. The automaker produced more than 100,000 vehicles in Q1 despite disruptions to both its Fremont and Shanghai plants. Further, deliveries of about 88,400 vehicles easily topped estimates of 79,900 deliveries.
It was the best first-quarter result in the company’s history, while momentum seemingly remains strong. According to reports, Tesla’s vehicle registrations in China jumped 450% from February to March, from 2,314 to 12,709. Other reports were less optimistic, but still recorded an impressive tally of almost 11,300 new registrations.
While we know that China was mostly shut down in February, that’s not really the point. The point is, while the coronavirus was a disruption for production, it’s clear that it didn’t disrupt demand. Consumers’ appetite for Tesla remains robust and that will help the company bounce back when life returns to normal.
Tesla Changes an Industry
Tesla has completely altered the trajectory of the auto industry, which was, and to an extent, still is a very well-established business. We have low-, mid-, and high-tier producers. Most build their ICE vehicles and send them to dealerships, which then sells to consumers.
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Seemingly everything Tesla does is different. The company doesn’t rely on dealerships and fat marketing budgets to drive sales. Instead, it sells online or via stores, then delivers the vehicle to customers or pickup locations.
Over-the-air (OTA) updates make it simple for customers to upgrade their vehicle after they take delivery of the car. Tesla produces fully electric vehicles that are unrivaled in the EV space, with the vehicles’ specs outperforming many high-end performance ICE vehicles.
Most importantly, it’s forced almost every other company to invest significantly in electric and autonomous driving technologies. This company continues to push the envelopment and is the very definition of disruption.
The Bottom Line on TSLA Stock
Admittedly, Tesla could be most consistent in regards to the bottom line and free cash flow. That’s certainly one knock against CEO Elon Musk. But by and large, he has created a disruptive company that has forced the rest of this very powerful industry to adapt. Now, they’re chasing its leader.
Tesla may not command the highest sales totals or the most profit, but that hasn’t stopped its vehicles and technology from forging the way forward. Other companies continue to work on autonomous vehicle (AV) solutions, but Tesla has been the most aggressive about implementing that technology.
While it has gotten some push back for doing so, the company is essentially building out an enormous test base for its AV features. Think about it. Each vehicle is a data point, returning feedback to Tesla’s AV team. For an A.I.-powered platform, increasing data is the clearest way to improving efficiency.
Although shares remain volatile, we remain buyers of TSLA stock on dips. That’s as the company continues to grow its production, as demand remains strong despite the coronavirus, and as the company remains a leader in EV and AV technologies.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
