Now is the time to dump Tesla Motors Inc (NASDAQ:TSLA) stock.
At least, that’s the chorus from analysts these days. Shares of TSLA stock have tanked over 15% in less than a month. All the hype about these “Tesla Killers” from competitors is only making matters worse.
Not so fast. Tesla has two game-changing projects that might be in the pipeline that could send the stock soaring. I suspect those betting against the stock now could be kicking themselves later. Let me explain.
This Could Be Big for TSLA Stock
The first is a project that Tesla chief Elon Musk hinted at during a conference in Hong Kong. This is something Tesla will eventually venture into in the coming years. (Source: “2016 StartmeupHK Venture Forum – Elon Musk on Entrepreneurship and Innovation,” YouTube, January 26, 2016.)
An all-electric Tesla truck!
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The prospects could be great for this new product line. Trucks have helped bolster sales for the three biggest automakers in the U.S.—General Motors, Ford Motor Co., and Fiat Chrysler. Stats confirm that light trucks have been very profitable for the Detroit Three in the past year, making up 70% of their revenue in the U.S. markets.
The trend was similar for Japanese automakers. Truck sales contributed to 50% of their revenue. (Source: “Ford Posts $1.9 Billion Profit,” The Wall Street Journal, January 28, 2016.)
Now, this prospect may sound very lucrative, but it faces a lot of question marks. I have to agree with the critics that there are too many technical difficulties involved. For lightweight vehicles, batteries have worked fine. But the dynamics are completely different for trucks.
How are we going to pull heavier vehicles, carrying heavier loads on these batteries? If we add more batteries, aren’t we adding more to the weight? What will be the range for these battery-powered trucks? Will it be comparable to gasoline-powered trucks? Those questions certainly pose a challenge for Tesla.
But Tesla bulls have reasons to believe in Elon Musk’s vision. Even with all the criticism he has faced, the man continues to take up new challenges. And so far, he has not let them down. Almost all of his predictions are coming true, albeit slowly.
As for the second project, Elon Musk gave away this secret back in October, when he unwittingly tweeted about a “Model Y.” He was quick to delete that Tweet. But his followers managed to get a screenshot in time. (Source: “Elon Musk just teased the Model Y in a tweet (which he immediately deleted),” The Verge, October 6, 2015.)
We may not know much about the car’s design or its launch date yet, but it’s certain that another car is in the pipeline after the “Model 3.” If not trucks, this is definitely where Tesla will find traction with EV enthusiasts. After all, premium electric cars are Tesla’s true economic moat.
The Bottom Line on TSLA Stock
The prospect of a commercialized all-electric vehicle was once only a figment of one man’s wild imagination. Today, it is about to become one of the mainstream modes of transport.
All eyes are set on the Model 3 now, which will likely be a game-changer for the company. The cheaper Tesla design for the masses will likely be revealed in March. Meanwhile, the Model Y might also be on its way, followed by a new product line in trucks. Seems like Elon Musk is going all in this year.
In short: Tesla is about to go mainstream. If it works out, it could redefine the future outlook for TSLA stock.