Tesla Inc (TSLA) Stock Got Slammed, But Remember Its Core Values
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“Wanna get away?” The catchy Southwest Airlines Co (NYSE:LUV) slogan perfectly matches the mood at Tesla Inc (NASDAQ:TSLA). Long Wall Street’s poster child, TSLA stock is recently giving even the most hardened bulls some pause. Although company shares are up a meteoric 50% year-to-date, it has been less impressive after loosely flirting with the $400 mark.
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Over the trailing month, Tesla stock is down 11%. Usually cocksure, the automotive tech firm’s smooth-talking CEO Elon Musk couldn’t deny some of the ugliness, which ranged from missing financial expectations to product safety questions to even his own mouth.
Despite being one of the smartest innovators of this generation, Musk apparently never heard the adage, “loose lips sink ships.” At a National Governors Association meeting, Musk stated that “our stock price is higher than we have any right to deserve.” Ultimately, his inexplicably strange comments has yet to have a decisive impact on Tesla stock. Nevertheless, on the day after, investors were understandably wobbly on TSLA stock.
The problem is that for many, an investment in Tesla is an investment in Musk. If the chief executive lacked the charisma, the star power and the boyish good looks, perhaps TSLA stock isn’t as much of a scorcher as it generally is.
But in light of the obstacles that Tesla must overcome — particularly negative analyst ratings and serious questions about its structural and technological safety — bullish investors needed Musk to be Musk. Instead, he turned into a sinner giving a confessional.
Despite some head-scratching missteps, I still believe in the long-term potential of TSLA. Here’s why:
TSLA Remains a Powerhouse Innovator
At the heart of the Tesla stock investment is a technology company, plain and simple. As InvestorPlace contributor Richard Saintvilus asserts, if TSLA is a genuine tech firm, then it should be treated as one. Worrying about “traditional” metrics such as profitability margins would be a mistake, especially at this stage of the game, says Saintvilus.
Indeed, TSLA has much more in common with an Amazon.com, Inc. (NASDAQ:AMZN) as it does a Ford Motor Company (NYSE:F) or a General Motors Company (NYSE:GM). I argued previously that Tesla is ahead of the electric-vehicle game not just in terms of tech but in marketing. They figured out the magic formula that EVs don’t have to be hideously ugly. By doing so, TSLA bridged the gap for those still unsure of EV technology by making it familiar.
Furthermore, we have to appreciate the magnanimous beauty that is “Gigafactory.” When fully completed in 2020, TSLA will have a 5.8 million square foot facility that will be dedicated in producing lithium ion batteries. In fact, the company hopes that it will produce “more batteries at this one factory than were produced in the entire world in 2014,” according to CNN. That’s a major upside to TSLA stock that gets squashed amid recent headlines.
While other automakers are gaining ground, it’s only Tesla that is fully committed to EVs. Such commitments naturally engender energy independence.
The Gigafactory is located in Nevada, it hires American workers, and the energy source is clean. Again, this is a win-win for Tesla stock.
Don’t Overreact to Tesla’s Elon Musk
As far as Musk’s comments, I would have preferred a more discreet approach. Then again, I’m not a multibillionaire, so my opinions don’t mean much. Nevertheless, I think some analysts are making it a bigger deal than it really is.
First, it could be worse. At least Musk didn’t blame the media or some other lame excuse for his company’s troubles. Some people may have found his remarks to be refreshing, and not the usual corporate nonsense.
Second, I believe the CEO recognizes serious challenges ahead. They will need to investigate their Autopilot feature and make absolutely certain that it’s safe. Also, they may need to analyze crash-test performance and make improvements where necessary. But these are common growing pains for any innovation-centric organization.
Better yet, Tesla has proven itself consistently.
Finally, Musk stated that Tesla stock trades on optimism for the company’s future. Although he may appear bearish, I think he’s just trying to temper expectations.
Despite his caveat, I don’t see why people wouldn’t be optimistic. TSLA is driving a paradigm shift in a staid industry, and consumers are loving it. Broadly, the tech firm is heralding a new economic era. Let’s at least see how this plays out before we throw in the towel.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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