How Is Tesla Turbocharging Its Share Price?
When you look at Tesla’s financial results from 2015, you would think ‘this is a company in serious trouble’, as its full year net loss was $889 million on revenue of $4.05 billion. On top of that, its fourth-quarter net loss nearly tripled to $320.4 million because of costs relating to the launch of the Tesla Model X SUV.
But since early February this pioneer in the design and engineering of electric cars has enjoyed a soaring share price. This is despite the fact it suffered a significant slide at the beginning of 2016. So, how has Tesla turbocharged its share price in recent weeks? And why should investors have confidence trading stocks or CFD with Tesla?
Recovering from a bad start to 2016
Due to a production lag, lower than expected delivery count, and increasing competition, Tesla’s previously steady share price took a massive hit at the start of 2016, as investors lost confidence and analysts lowered their target price. By the time earnings results were released on 10th February, Tesla stock had plummeted a whopping 38 per cent.
However, Tesla’s share price now hovers around the $200 mark once again. While this is thanks in large part to easing investor concern about execution abilities, low EV demand, and supply gaps, the biggest driver behind Tesla’s resurgent share price is actually pure speculation.
Tesla is banking on future success
At the end of March, Tesla’s long-awaited Model 3 will be unveiled. Many automotive experts and investors see this as a make or break launch event for the company, as the smaller Model 3 is aimed at the mass market and seen as “the litmus test for the viability of electric cars,” according to Alan Tovey, Industry Editor at the Telegraph. The Model 3 is expected to cost around $35,000, around a third cheaper than the Model S, with deliveries beginning in late 2017.
Tesla has expressed enough optimism with the Model 3 launch to make a bullish case for analysts. It has sent out invitations to winners of the Model S referral program, told people about the closest airport to the event (Los Angeles International), and provided a list of nearby hotels too. This doesn’t reveal much about the Model S launch, but it has boosted Tesla’s share price in February and could well continue to increase confidence for the coming weeks as well.
Looking at Tesla with the long-term in mind
As Jack Delaney, Associate Editor of Money Morning explains: “Because TSLA is a momentum stock, any miss in earnings could create a wild price swing. That’s why we don’t recommend Tesla stock for short-term investors.”
Instead, investors should be looking at Tesla with long-term objectives in mind. Forward guidance on vehicle deliveries as well as Model X news, which has been plagued by delays due to complicated design features, will undoubtedly dictate Tesla’s stock price. But Delaney says “this one catalyst is what will drive the TSLA stock price in 2016 and beyond. And many on Wall Street are overlooking it…”
Debbie Fletcher is an enthusiastic, experienced writer who has written for a range of difference magazines and news publications.