Last week, Tesla (NASDAQ:TSLA) reported better-than-expected first-quarter deliveries. Since reporting those results, TSLA stock has gained 14%. Year to date through April 6, it is up 23.4%, significantly better than the 18.4% decline of the U.S. markets as a whole.
Who knew that Tesla could be a good hedge against a falling market? Most likely, anyone who believes in innovation getting us out of the current mess we’re in.
Tesla CEO Elon Musk and his team in Buffalo have pivoted to create a ventilator that can help save lives. The company is using Model 3 parts to make it happen.
The plant, which usually makes solar panels, would reopen to turn the prototype into actual working ventilators. Unfortunately, there’s not much chance that Tesla’s going to be able to make them in time to meet the apex of the coronavirus in New York.
Honestly, it would have been interesting to have had someone like Musk in charge of the Federal government’s coronavirus response from the very beginning. In conjunction with Dr. Anthony Fauci, the duo could have made a difference.
Sadly, that ship has sailed, and our lives are in the hands of President Trump. But I digress.
TSLA Stock Having a Stellar Year
I find it amazing that out of 607 U.S.-listed stocks with a market capitalization greater than $10 billion, Tesla is one of only 40 stocks up more than 10% in 2020.
Tesla? That company that people continue to argue can’t possibly make money consistently.
Well, if you’re in that camp, you’ll likely get your way in the second quarter, thanks to the devastation of the coronavirus. In the short-term, Tesla stock could enter negative territory as investors realize the extent of the damage done by the virus.
It’s hard to imagine Tesla reaching its goal to deliver 500,000 vehicles in 2020. While it finished the first quarter with 88,400 deliveries, 10,300 higher than the analyst estimate, the second quarter is expected to hurt all manufacturers.
Estimates by IHS Markit suggest the total global car deliveries in the second quarter will fall 12% year-over-year to 78.8 million. In January, IHS Markit’s estimates for the second quarter were 10 million higher.
Whether we’re talking about Tesla, General Motors (NYSE:GM) or Toyota (NYSE:TM), the numbers are going to be abysmal. There’s no getting around that.
Tesla reports Q1 2020 results on April 29 after the markets close. We’ll find out at the end of the month just how bad the second quarter is expected to be. Tesla’s production at its plant in California has been idle since March 24. The plant in Buffalo has also been idled.
However, its Shanghai production facility reopened February 10 after being closed for two weeks as a precautionary measure against the coronavirus. By the end of March, its Shanghai plant had gotten back to producing 3,000 vehicles per week. Its goal for the year in Shanghai is 150,000, with Model Y production in China getting underway soon.
That’s excellent news.
Buy on the Dip
Long-term, I’m 100% behind Ark Invest CEO Catherine Wood’s $7,000 prediction for TSLA stock by the end of 2024. In my most recent article about Tesla in February, I reminded investors that a good sell-signal for its stock would be when Wood’s ARK Innovation ETF (NYSEARCA:ARKK) unloads its position.
There are lots of tech companies in America, but few with the innovation chops of Tesla. That’s why I’ve long been a fan of Musk and the company.
As we head into the second quarter, there are plenty of analysts who’ve turned bearish on Tesla. It’s hard to argue with this logic. However, whatever happens to Tesla, I’m confident that GM and Ford (NYSE:F) will suffer just as much, probably more.
While lower gas prices could convince a few people to hold off buying an electric vehicle, that train has already left the station. Long-term, Tesla will benefit from leading the charge.
As I write this, Tesla stock is trading around $538. If you hold for 2-3 years, I think it’s a buy. If it falls into the mid-$400s, which it very well might in the next 2-3 months, it becomes a screaming buy.
Forget value-play Ford. Innovation makes Tesla a better buy.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
