Is It Time to Change the Conversation About TSLA Stock?

Advertisement

Tesla (NASDAQ:TSLA) continues to be one of the most hotly debated stocks. Is this simply one of the last unicorns to burst investors’ hopes and dreams? Or is Tesla truly the manifestation of a “new” car company, one that puts technology at the forefront? For the first two months of 2020, investors were bullish on TSLA stock, bidding the stock up over $900 per share.

Is It Time to Change the Conversation About TSLA Stock?

Source: Hadrian / Shutterstock.com

Then the coronavirus hit the markets. TSLA stock is down 50% from its lofty highs. However (as of this writing) the stock remains positive for 2020.

Analysts are eagerly awaiting Tesla’s first-quarter delivery numbers that are due out the week of March 30. Wedbush is predicting Tesla will deliver between 400,000 and 425,000 cars in 2020, down from Tesla’s prediction for 500,000. Wedbush lowered its 12-month price target for TSLA stock to $425. JMP Securities analyst Joseph Osha lowered his 2020 delivery estimate to 433,000 from 523,000.

The bigger problem I see for TSLA stock is that investors have been bullish on it based on certain assumptions. But a good investor is able to adjust to changing circumstances. It’s possible that recent events may fundamentally change the landscape for Tesla.

Telecommuting Is Here to Stay

The coronavirus is forcing more Americans to work from home. Could this be a tipping point? Kate Lister, President of Global Workforce Analytics, believes that’s exactly what it is. According to Lister, in the aftermath of the coronavirus, 25% to 30% of American workers may telecommute at least two days a week within two years.

How likely is that? Events like the coronavirus force us into new paradigms. In this case, many Americans that formerly resisted working from home may find it to be desirable. And with many millennials and Generation Z workers juggling student loan debt and enticingly low mortgage rates, keeping an older car around may make prudent financial sense.

Softening demand will damage electric car sales projections just as electric cars make up a higher percentage of car company’s inventories. Plus, since electric cars are more expensive than traditional internal combustion vehicles, investors should not ignore this possibility.

Social Distancing Is Reducing Our Carbon Footprint

Oil prices just hit 18-year lows. Gas prices continue to tumble. Many analysts think that both will rebound when the coronavirus threat recedes. However, it’s fair to question what the new normal will look like.

One of the strongest arguments for electric cars is our society’s need to reduce our carbon footprint. The coronavirus is taking care of that in a way that was impossible to predict. This should be a grand slam home run for climate change advocates, but I have not seen so much as a tweet about it.

Here’s what Global Workforce Analytics says about the impact of telecommuting on our carbon footprint:

Eliminating or reducing commuter travel is the easiest and most effective way for a company or individual to reduce their carbon footprint. Based on our estimates, if those who have a work-from-home compatible job and a desire to work remotely did so just half the time, the greenhouse gas reduction would be the equivalent to taking the entire New York State workforce off the road.

At some point, employers and employees will ask if telecommuting is not just a sound practice for worker safety and wellness, but whether it changes the conversation about climate change. Either way, it could impact the demand for electric cars.

The Infrastructure for Electric Vehicles Is Still Not Available

According to the International Council on Clean Transportation (ICCT), 88 of the 100 most populous U.S. metropolitan areas have less than 50% of the total needed charging infrastructure. This is based on the expected demand for electric vehicles in those areas.

I believe this is an important point because it points out that TSLA stock faces headwinds on both sides of the electric vehicle spectrum. Even if demand remains strong, there has to be an infrastructure in place. The government would be a logical source of funding for that. However, with the $6 trillion dollar stimulus package having just been passed, that seems unlikely. Then again, what’s another trillion dollars at this point?

Is TSLA Stock a Buy at Current Levels?

The Tesla bulls have proven time and again that they vote with their dollars. With that in mind, I wouldn’t doubt that TSLA stock may indeed start to climb back to its lofty prices of January and February.

But if that’s the case, then investors may very well be moving the goalposts. After all, if ultimately a car company has to sell cars, then it’s hard to ignore the possibility that demand for cars of all kinds may be suppressed for much longer than the coronavirus quarantine lasts.

And if investors are willing to ignore sales, then I think that says all you need to know about TSLA stock. I think the stock is coming back down to earth, but I need to be convinced the economy is really back before I get excited about the stock.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/tsla-stock-new-normal/.

©2024 InvestorPlace Media, LLC