Will You Buy The Dip In Tesla?

Tesla shares crashed in January, to the delight of a group of vocal perma-bears who conduct an ongoing vendetta against the very existence of the controversial and disruptive company on other forums.

Polemics aside, for CEO Elon Musk, January was indeed a perfect storm. I imagine there was some concern about the possible insolvency of Tesla Motors, in part due to the fact that Musk has the vast majority of his personal wealth tied up in the company and his other prime asset, Solar City, was getting decimated at the same time.

When it comes to his projects, however, Musk is incredibly tenacious and quite accustomed to going ‘all-in.’ This week we learned more about his commitment to excellence after analysts from Stifel, Credit Suisse and Baird published reports about dramatic improvements on the manufacturing side of the business, which they saw firsthand in the course of recent site visits.

The analysts’ reports are laden with effusive comments; phrases like “stunning progress,” “revolutionary production processes,” “management is improving by the minute,” “an energy and buzz that’s hard to imagine.” I’ve followed the markets for 20 years and 15 of those have been in a professional role, and yet I can’t remember a similar instance where analysts from competing companies were unanimously blown away.

Like the Model S itself, Tesla Motors is now charged up and executing with tremendous torque. The new paint shop, capable of scaling to 500,000 cars a year, the new aluminum body stamping press (10-20 times faster), an improved assembly line that can turn out 100,000 cars a year, plus falling battery costs makes the coming debut of the Model 3 at the end of this month a much more meaningful event.

And with the improvement in the general market climate, for Tesla, good news is starting to be good news. The glowing assessments by a chorus of professional auto analysts have prevented institutional selling on this rally. That, in turn, has resulted in a massive short squeeze, with shares up 55% in 5 weeks. With longs piling on, this rally has hardly had a pullback. It will, and perhaps soon… and the dip will be bought.

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