Tesla Inc (NASDAQ:TSLA) CEO Elon Musk is an adept user of the “reality distortion field” — using his personal charm and cult-like following to whip up sentiment whenever the market starts to doubt. The hype helped push TSLA stock’s market cap above Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) despite the fact the company isn’t profitable, is burning cash rapidly and it only provides a tiny fraction of the number of vehicles of the established Detroit stalwarts.
With Tesla stock flirting with a bear market — down roughly 20% from its high a few weeks ago — on disappointing Q2 production numbers and a bearish note from Goldman Sachs analysts highlighting waning demand for the Model S/X, Musk swung into action this weekend by tweeting a picture of the first production Model 3 sedan.
Wall Street’s reaction to this? Indifference with TSLA stock only up 0.4% at the time of this writing, after declining as much as 3.2% earlier in the session.
This is surprising, and if it represents a collapse of Musk’s ability to swap sentiment could have a major detrimental effect on the company’s ability to keep growing. After all, Tesla stock’s success has depended almost entirely on the company’s ability to raise very cheap capital through secondary offerings, among other things.
It’s hard not to call BS on some of Musk’s proclamations, like how he expects Model 3 production to ramp from 0 to 20,000 per month by December or how he wants to build 10-12 gigafactories (when the first is expected to have as much battery production as the entire rest of the world within its walls) or how new products like a Tesla semi-truck will be worthwhile pursuits.
It’s put up or shut up time for the long-awaited Model 3 with customer deliveries expected later this month as automakers from Volvo AB (ADR) (OTCMKTS:VOLVY) to Jaguar become increasingly aggressive in their electrified vehicle offerings.
Tesla will next report results on Aug. 2. A loss of $1.62 per share is expected on revenues of $2.71 billion. When the company last reported on May 3, a loss of $1.33 per share was 55 cents worse than expected on a 135% jump in revenue.
Watch for a possible decline to the 200-day moving average near $260, which would be worth a 17% decline from here.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
