What the Bears Don’t Get About TSLA Stock
Tesla Motors, Inc. (NASDAQ:TSLA) is fundamentally changing the auto industry, whether you like it or not. The outlook for TSLA stock is obvious to those paying close attention, but the bears don’t do that; they don’t search for understanding.
Those praying for the downfall of Tesla stock are often ideologically opposed to electric cars or they think the company’s customers have been hoodwinked by Elon Musk. They don’t try to comprehend the larger plan behind Tesla Motors, because it’s too bold for them.
It’s so easy to say that people are being idiotic by spending huge sums on a luxury electric car that can’t be driven across the country. I’ve met plenty of analysts who are car enthusiasts and they can’t stand the thought of a new carmaker eclipsing the old guard. The idea of a new brand offends them.
When you ask if their affection for Porsche and Ferrari colors their perceptions of Tesla stock, they immediately deflect to Tesla’s recent earnings report, its downgrade in Consumer Reports, or the general costliness of Tesla cars.
All three of those points are red herrings. Here’s why…
Tesla Stock Could Soar in 2016
First off, the Consumer Reports downgrade wasn’t really a negative story; that’s just how the media chose to cover it. One month before, the same publication had given the Tesla “Model S” an impossible ranking of 103 out of 100. They loved the car.
But they got a lot of heat from Tesla bears. Naturally, they had to prove they weren’t biased, so when Tesla recalled some Model S vehicles, the magazine downgraded Tesla on “reliability concerns.” (Source: “Tesla Reliability Doesn’t Match Its High Performance,” Consumer Reports, October 20, 2015.)
However, most reporters didn’t read the article closely enough. Consumer Reports also mentioned that 97% of Tesla owners would gladly buy their Model S all over again. Does that sound like Tesla is a fad? Maybe, if you’re viewing it through an ideological lens.
As for Tesla’s poor earnings report, what did you expect from a young firm still in expansion mode? There hasn’t been a new American car company in decades, well, not a successful one anyways.
Tesla has poured a ton of capital into its new battery production plant out in Sparks, Nevada. The “Gigafactory,” as it’s called, is a massive undertaking to diversify Tesla’s revenues. Rather than just cars, Tesla also wants to sell a line of batteries. (Source: “Tesla Gigafactory,” Tesla Motors, Inc. web site, last accessed December 4, 2015.)
Investments always precede earnings; that’s how business works. But Tesla bears are willing to ignore that fact because it suits their ideology.
The Unlimited Potential of TSLA Stock
Tesla is expected to move back into the green early in 2016, especially once the revenue from its “Model X” edition starts pouring in. In the meantime, TSLA stock will continue to rise on the strength of its long-term vision.
My final point is dedicated to all the people who decry Tesla’s price point. Yes, the “Roadster” was an expensive luxury sports car. Yes, the Model S was a slightly less expensive luxury car. And yes, the Model X, while cheaper than the Model S, was still expensive to most people living in the United States.
However, do you see the pattern? Each new release by Tesla is marginally less expensive than the one that came before it. This trend is also related to the amount of cars Tesla is selling, which is not by accident. Elon Musk designed Tesla to move down the price ladder.
That was the only way for a new electric car company to survive: high-margin cars when the sales volume is low, then cheaper cars as the company broadens its market share. The tipping point for Tesla will come in 2017 or 2018, when it opens a $35,000 sedan to the wider market. (Source: “Confirmed: The $35,000 Tesla Model 3 Will Be Unveiled in March 2016,” Popular Mechanics, September 23, 2015.)
If anyone is still bearish on Tesla stock at that point, someone should hand them a box of tissues; they’ll need it when they realize what they’ve missed out on.