By Michelle Jones
It seems like shares of Tesla Motors Inc. just won't quit, but some think it's time for investors to slow down
Tesla Motors Inc (NASDAQ:TSLA) shares have been back on a tear over the last several months, rising by 80% year to date and hovering near their all-time high. Meanwhile the broader stock market has stalled and begun to slump today, especially after the latest news out of Ukraine, although Tesla is down just .3% as of this writing. So is this the time to keep hitting the gas on Tesla stock, or is it time to let off the accelerator? As always, it depends on who you ask.
Why Tesla stock has momentum
So why have investors been snatching up shares of Tesla Motors like they’re going out of style? Fortune’s Alex Taylor III offers a few reasons, like the fact that the automaker’s running a hot and heavy competition among a handful of states about where it will put its gigafactory. In addition, Tesla’s order backlog is up to $226 million. With a production rate of 1,000 cars per week, which management expects by the end of this year, that amount will keep the automaker filling orders for 30 weeks without even accepting any more orders.
In addition, Tesla Motors Inc says its sales per square foot in its showrooms are twice that of Apple Inc. (NASDAQ:AAPL).
Trouble ahead for Tesla?
The problem, however, is that bears think Tesla stock is already priced as if it is selling hundreds of thousands of cars annually. The article in Fortune puts this into perspective: investors are valuing every car the automaker sells at $1 million. So Wall Street is also banking on the automaker delivering on its promises years into the future—so much so that Tesla’s promises are worth more than real results from other luxury automakers.
As a result, Tesla Motors Inc management must execute on all of its promises perfectly with almost no mistakes. Currently, the automaker only caters to the rich. Taylor suggests that Tesla’s cars are just a passing trend that the rich will get over sometime, which means that the automaker will see a drop in its order backlog and demand for its cars will no longer be so much greater than supply.
Assuming that the company keeps growing over time, it will become more complex, and Taylor notes that Tesla has guaranteed to buy back its used cats for half their original base price after just three use of growth. The result is going to be a lot of used cars, and some think this will be a huge problem.
And then there are concerns that battery-operated cars could only be a transition technology moving forward, as Tesla Motors already has its future mapped out to 2017 with the Model 3 mass market car.
Consumer Reports rethinks its rating
Don’t forget that outside noise tends to affect the automaker’s stock price a lot. This week, Consumer Reports, which handed out its best review ever for a car to the Model S, is beginning to think again about that rating. The magazine reports that workers have noticed some problems with the car recently, and it hasn’t been that long since it was given the car to review.
For example, there are problems with the door handles activating, and the center touch screen went blank, thus keeping drivers from being able to access many of the car’s functions. Edmunds.com also reported problems with its Model S. With how last year’s fiery Tesla accidents weighed on the automaker’s stock price, it seems like only a matter of time before this begins to worry investors.
Tesla at the mercy of day traders?
A report from Talking Numbers’ Lawrence Lewitinn (posted on Yahoo! Finance) indicates that there may be another huge issue with Tesla Motors Inc stock right now too. Cowen and Co. analyst David Seaburg suggests that investors hit the brakes on Tesla until shares fall to $217. He says that right now, the automaker’s stock is in “weak hands.” He adds that because of the current levels, hedge funds are probably out of the stock, leaving it in the hands of day traders.
Seaburg adds that he thinks there will be a pullback sometime, and it’s only a matter of when.
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