The Tesla Model S is a ground-based vehicle, however when driving one, the nearly 1000/ft/lbs of torque at the wheels makes it seem like the sporty sedan could almost fly. The ‘astronaut effect’ is palpable behind the wheel and the stock isn’t much different.
But heads up: shares of TSLA may be about to hit an air pocket.
One of the core tenets for Tesla bulls (such as myself) is that demand far exceeds supply… and perhaps always will. Last fall, CEO Elon Musk repeatedly emphasized the strong demand picture in his discussions about the company’s production constraints due to limited battery supplies. His downbeat tone about vehicle deliveries exacerbated the 40% share price slide during the safety controversy in October and November.
You may have noticed, however, that the tone of the company’s forward-looking comments changed significantly on January 14, when Jerome Guillen, Tesla’s vice president of sales, announced that Tesla would pursue “reckless growth” in 2014. He later corrected the term to “relentless,” but the change in message was unmistakable. On that day, shares of TSLA put the pedal to the metal and rose more than $25, beginning a relentless rise to new all-time highs.
Tesla Motors is a “growth stock” and sales growth matters. Europe and Asia are considered key markets for Tesla and together they are expected to account for about 2/3 of global sales this year. Anecdotally, however, there appears to be a marked slowdown in European demand, such that management has begun to discount the Model S there from 5-10% compared to 4th quarter price points.
A small amount of the price reduction can be explained by the appreciation of the Euro vs. the Dollar since mid-December, but there are rumors of lackluster Model S registrations throughout Europe, including Germany, a country that would be expected to covet the Model S from an engineering and performance standpoint.
Management does not supply monthly sales data, so rumors and guestimates are all we have until the next earnings report in May. As a confirmed Tesla ‘bull’ I’m not concerned about the long-term picture, but a quarterly sales miss this early in the game would be a disruptive event for the stock price, perhaps generating another 40% drop over 2 months (mid-May to mid-July).
This would certainly test the resolve of those on the sidelines who say they are waiting for a major “dip” to get in. Personally, however, I already own shares and I plan to buy pullbacks on every disappointing delay and disruption between now and 2020.
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Learn more about Tesla at Teslachronicles.com
