Does Tesla (TSLA) Stock Deserve the Hammering it Gets?
Tesla Motors is considerably down due to negative commentary from the Street; Bidness Etc analyzes if the stock market jitters are justified
Tesla Motors Inc. (NASDAQ:TSLA) stock has seen a considerable downfall in its value since last month, as concerned investors await the company’s earnings for the fourth quarter. Shares were down 27.2% in January alone, as historically bullish firms, such as Morgan Stanley and Pacific Crest Securities, remain skeptical about the company’s growth prospects.
Plethora of Growth Catalysts for the Company
Tesla’s extraordinary growth over the past three years has been single-handedly led by the iconic premium Model S sedan. The electric vehicle has been flying off the shelves at the company’s exclusive direct sales stores.
Tesla recently rolled out a second premium vehicle, the electric Model X crossover SUV, and aims to unveil a new smaller, mass-market electric sedan, dubbed the Model 3 in March. The company’s expansion from one production model to three is appreciable.
The EV manufacturer has also announced plans to expand into the burgeoning energy storage business via a line of stationary battery storage application systems for industrial as well as regular home and office use. Tesla and some analysts share the view that the energy storage opportunity could one day trump the company’s core electric vehicles business. That’s how big this emerging revenue stream could prove to be.
Talking about big plans, the company is developing an independent, in-house lithium-ion battery plant in Nevada, which it hopes will slash battery costs by at least 30%; batteries are the largest cost-component for electric vehicles. Certain factory units will begin operations later this year, Tesla has said.
It seems Tesla’s high valuation is a result of innovative product development strategies and investment plans. The problem, however, is that these potential catalysts have yet to see the light of the day.
“Presumed” Growth Catalysts
Several firms including Morgan Stanley and Pacific Crest Securities, have raised doubts over Tesla’s ability to ramp up enough sales to sustain previous revenue growth numbers. The company is still constrained within a single manufacturing plant in California, which will soon be burdened with production load of three different models. One model, namely the Model 3, will require big production numbers due to its comparatively reasonable price tag.
Given Tesla’s rather slow production of the Model X, analysts have expressed concerns if the lack of resources has marred the required mass scale production. Transitioning into a mass market automaker is at the center of Tesla’s dreams to achieving consistent profitability.
Emerging competition from other more resourceful automakers in the mass markets also looms over the company. GM is manufacturing the electric Chevrolet Bolt that it calls the Model 3 killer, and Nissan’s electric Leaf is already the bestselling electric vehicle brand. This could prove to be a major trouble for Tesla when it rolls out the Model 3 in 2017. Adding to an already competitive electric vehicles market is the impact of extremely cheap fuel prices, which Tesla CEO Elon Musk himself admits, is eating away the market for plug-in vehicles.