Tesla’s stock (TSLA) fell back roughly 20 percentage points since hitting a new all-time high in September. Despite a series of major news about the company over the last few weeks, the stock has mostly been trading sideways as analysts and the market don’t seem to have a good grasp on the situation.
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Morgan Stanley analyst Adam Jonas, one of the most popular analysts following Tesla, even released a note today predicting a roller-coaster ride for investors next year:
“We expect Tesla shares to be extremely volatile in 2018, divided into two stages: (1) The alleviation of production bottlenecks with strong cash inflow, and (2) mounting concerns over the sustainability of the competitive moat. Tesla 2018: $400 then $200?”
Basically saying that it could go either way, which is generally seen as a cop-out for analysts.
In the short-term, Tesla’s success is still highly dependent on the Model 3 production ramp up. They invested billions at the Fremont factory and Gigafactory 1 in Nevada for the vehicle program.
In order to start seeing returns on those investments, they need to start delivering the vehicle in volume.
We have recently seen increasing evidence of continued deliveries from Tesla over the last few weeks, but nothing that would suggest a significant increase in production capacity.
In his note to clients today, Jonas says that he expects Tesla to fix its battery module production issues, which is apparently the biggest production bottleneck at this point, “in the coming weeks.”
Some are saying that Tesla’s event last week was a distraction from the Model 3 program, which could explain why the market didn’t go crazy, as some expected, following the event even though Tesla unveiled two new product lines.
I personally don’t believe that the Tesla event last week was a distraction tactic. Those vehicle programs were in the works for a long time and way before Tesla had any idea what kind of issue would arise regarding Model 3 production.
They even delayed the event last month officially to “focus on Model 3 production” among other things.
I think they unveiled those products because the prototypes were ready and now they want to gauge the interests for those vehicles.
With $5,000 deposits for the trucks and $50,000/$250,000 deposits for the new Roadster, those reservations will mean a lot in terms of interest and if they turn out to be popular again even following the Model 3 delays, it would be a giant confidence boost for Tesla.
A few companies have already confirmed truck reservations and Tesla started taking Roadster reservations at the event.
Even though the specs and design were impressive for almost everyone, it can still be difficult to understand just how significant those products can become.
We would expect the company to potentially start releasing some of those reservation numbers as early as by the end of the week, which could definitely paint a clearer idea of the situation.