Tesla (NASDAQ:TSLA) is off to a roaring start this week, even in the face of bad news. The electric vehicle (EV) innovator is being forced to recall almost 600,000 vehicles due to a malfunction with its “boombox” feature. That number may not sound encouraging, but it hasn’t influenced TSLA stock today. That’s because investors are well aware of the company’s history. Tesla has recalled EVs before, and share prices have never been down for long.
What’s Happening With TSLA Stock
Despite some slight turbulence, TSLA stock has performed well today. It dipped this morning but was quick to rebound and has been rising since. As of this writing, it is up more than 2% for the day. While these gains are likely due to the company’s approaching Q1 earnings call, it’s worth noting that the recall hasn’t pushed shares down so far.
Let’s take a closer look at the reasons why.
Why It Matters
February 2021 saw not one but two Tesla recall announcements. Both sounded more serious than a glitch within the boombox feature. The first involved a problem with the company’s full-self driving (FSD) technology at stoplights. The second was caused by a problem with its seatbelt chime. In both cases, TSLA stock suffered only minor declines and was quick to bounce back, sometimes soaring into the green before the end of the trading day.
Throughout Tesla’s recall saga, one common theme has emerged: recall-generating problems can be resolved through over-the-air (OTA) solutions. Investors know that when a company introduces as much innovative tech as Tesla, there are bound to be glitches. However, the rise of OTA technology has made it easier than ever for Tesla malfunctions to be fixed with minimal inconvenience for the owner. Road Show reports that this time will be no different. Tesla owners will receive a free software upgrade to deal with the problem, if they have not already. In either case, it should be easily resolved.
The boombox feature “allows the vehicles occupants to use an external speaker to make announcements or play sounds directed at passersby and other motorists.” While it has ignited a fair amount of controversy, Tesla maintains that it is “unaware of any crashes, injuries or fatalities stemming from this function.”
Even when Tesla has reported more serious safety problems, it hasn’t harmed TSLA stock. Today also brought reports that the company’s autopilot feature is causing alarm among regulators. Even if it is, share remain in the green, proving that safety concerns don’t spook investors.
What It Means for TSLA Stock
The underlying message on Tesla recalls remains the same; they do not affect TSLA stock. Reports of vehicle safety problems have circulated throughout the year, but investors can rest assured that it takes a different type of bad news to force TSLA down. TSLA is more likely to be affected by negative market momentum than by large-scale vehicle recalls.
For all the recalls we’ve seen this year, demand has only risen. So far, Tesla hasn’t had a problem meeting it. Buyers are more drawn to EVs than ever and have proven that they want Teslas. Investors should be focused on the Q1 earnings call, not the recent recall.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
