Tesla Inc (NASDAQ: TSLA) has undoubtedly had a rough month. In fact, in the past month alone, the stock has given up around 26% of its value as concerns surrounding leadership shaped the movement in the stock’s value. Nonetheless, some are saying that the weakness is opening the door to opportunity. Today, we’ll talk about:
- Why TSLA is having such a rough time;
- whether or not this weakness is an opportunity in my view;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
Why TSLA Has Struggled Over The Past Month
The struggles that we’ve seen from Tesla over the last month are actually the result of a story that started a while ago, the Model 3. Ultimately, the company designed the Model 3 to provide a high-end electric vehicle to consumers at mass-market pricing. However, the vehicle has been riddled with issues.
No, the brakes aren’t going out and the car isn’t combusting into flames for no reason. Nope, the issues have had to do with manufacturing. Ultimately, TSLA had specific goals in place with regard to manufacturing, and until recently, hasn’t been hitting these goals. Ultimately, the process has been riddled with headaches and delays, concerning investors.
Nonetheless, Elon Musk announced a going private transaction, stating that funding had been secured and sending TSLA soaring in the market. Unfortunately, this proved not to be the case. As time passed, it became clear that funding was not secured and that the going private transaction would not be happening. Unfortunately, this led to a loss of faith in the company among investors. After all, if the founder and CEO decides to lie to investors, it’s not going to go well. In fact, Open Outcrier, a trusted twitter user in the industry said in a Tweet that the original message by Elon Musk would be the most expensive Tweet ever. See the tweet below:
— Open Outcrier (@OpenOutcrier) August 25, 2018
Is Now The Time To Get Involved
While the going private transaction seems to be off of the table, with recent 26% declines, many believe that now is the time to get involved. The truth is, it’s hard to argue against this idea. The truth of the matter is that while the Model 3 has been riddled with production issues, Tesla has largely solved these issues and production of the mass-market vehicle is finally on track.
In fact, Toni Sacconaghi Jr, analyst at Bernstein recently issued a note pointing to recent declines as a factor of potential. In his note, Sacconaghi made a point of saying that Model 3 production remains on track.
The truth of the matter is that the Model 3 is an incredibly important vehicle for TSLA. If all goes well, mass production will turn into mass sales, and Tesla could see some serious revenue. Of course, if sales flop, the stock could fall dramatically. Nonetheless, no one expects sales to flop. The car seems to be a great value and the mass market should eat it up. So, should there be no more production issues, the Model 3 could launch TSLA through the roof. So, in my opinion, recent declines do indeed represent an opportunity.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. In the case of TSLA, the news is starting to turn positive. After a month of bad press, investors are seeing an opportunity to get in at a steep discount, and that opportunity seems to be being validated by analysts. So, it comes as no surprise that excited investors are sending the stock up in the marke this morning. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:24), TSLA is trading at $272.37 per share after a gain of $9.13 per share or 3.47% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on TSLA. In particular, we’re interested in following the story surrounding the company’s continued work with regard to the Model 3. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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