Is Tesla Stock Headed Higher?
The vultures are circling over Tesla Motors, Inc. (NASDAQ:TSLA), eager to feast on the corpse of TSLA stock and the dreams of Elon Musk. Too bad they won’t get the chance. I’ve been reporting on Tesla for a long time and it looks like the stock is headed higher in 2016.
There are three main tailwinds for Tesla stock and we’ll know a bit more about each factor as the next year unfolds. By my calculations, the scales will tilt in Tesla’s favor, promising huge gains for the company’s stock.
So far, 2015 has been a rollercoaster for Tesla. Shipments for the Tesla “Model X” were delayed and the company had to perform a recall for minor repairs. All automakers eventually end up doing a recall for something or the other, but like I said, there are vultures waiting to devour Tesla. The recall was poorly timed and made worse by a Consumer Reports article that downgraded the reliability of Tesla Motors.
It was a harsh blow to TSLA stock, but it wasn’t a lethal one. Investors are still waiting to see how a few other things play out for Tesla, namely its “Gigafactory,” the Tesla “Model 3,” and the company’s driverless technology.
TSLA Stock Depends on These 3 Factors
Most of the bearish analysis on Tesla stock belongs to two camps: climate change skeptics and people who think that Tesla could never produce enough earnings to justify its current valuation. I also know one analyst who doesn’t like Tesla because he thinks “Elon Musk is smug.”
Putting aside the absurdity of that argument, let’s focus on the second group. TSLA stock is trading at a significant premium; there’s no denying it. But what the bears ignore is Tesla’s research into new battery technology.
Chart courtesy of www.StockCharts.com
Tesla invested a ton of cash into building a massive factory for battery production, dubbed the “Gigafactory.” The investment dented its earnings this year, but that’s just how business works. Profits don’t appear out of thin air and competitive advantages don’t last forever. For Tesla to expand, it needs alternative ways of making money, like selling batteries, for instance.
Elon Musk had the wits to start an electric car company and make it successful before anyone else. Now he has to keep it that way, which means that investment in new technology is a necessity, not a luxury.
Moreover, the Tesla Model 3 will be unveiled next year. Tesla has been working its way down the price ladder as it attempts to target a broader market. The Model 3 is supposed to be the first affordable sedan from Tesla, meaning it could do wonders for TSLA stock.
Finally, there’s the driverless technology that will propel Tesla stock to new levels.
Why I’m Still Bullish on Tesla Stock
The final reason to be bullish on Tesla stock is the icing on the cake. If you follow the news as closely as I do—which may be unlikely because it’s my job to do so, after all—it looks like everyone is getting into the driverless technology race.
Of course, there’s Google, now known as Alphabet Inc, which pioneered self-driving cars. Then we have Tesla and its commitment to driverless technology, followed by a range of other automakers. Now we have Apple Inc. and Uber Technologies joining the party.
Altogether, the field is getting a little crowded. Nonetheless, Tesla has a distinct advantage over the other firms because it planned ahead. Since October 2014, Tesla has fitted every “Model S” with sensors, cameras, radar, and sonar. A year later, Tesla pushed a software update to its fleet of Model S vehicles. Immediately, customers could engage a new feature called “Autopilot.” Autopilot is an early stage of driverless technology that allows the car to change lanes in all types of traffic on its own.
The sophistication of Tesla’s onboard computer sets the company’s cars apart and keeps TSLA stock poised for a big year in 2016.