Are Tesla Stock Investors Seeing Some Stability, at Last? (Uh, No)

Going into earnings, due October 23, Tesla (NASDAQ:TSLA) is offering a calm but fraught chart pattern. TSLA stock has spent most of the last three months between $220-250, whipsawed (as usual) by various rumors, small news events, and irrelevancies.

Are Tesla Stock Investors Seeing Some Stability, at Last? (Uh, No)
Are Tesla Stock Investors Seeing Some Stability, at Last? (Uh, No)

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The shares closed near the top of that range, at over $247 on Friday, as short volume has (for now) fallen to 21%, after topping 25% at the start of the month.

If the company can hit the “whisper” estimates for the quarter, a $250 million or $1.40 per share loss on $6.6 billion of revenue, it could sound an all-clear. Official estimates are for a smaller loss on lower revenue. Hedge funds had been edging back into Tesla shares early this year, as it fell to a low of $185.

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The TSLA Bull Case

Tesla has gone from being a curiosity to a major maker of luxury cars.

It was the leading luxury nameplate in the U.S. during the second quarter of the year. It had more than double the sales of Lincoln, Buick and Cadillac combined. Almost one-fourth of the small- and mid-sized luxury cars sold in this country are now made by Elon Musk’s minions.

During the third quarter, Tesla delivered 97,000 cars. Reporters called it a failure, short of estimates, but delivering 105,000 in the fourth quarter will still bring its total for the year to 360,000. Musk is telling employees they can get close to that figure.

Tesla’s Shanghai factory could start production this month, producing at a 500,000 car per year rate by the end of the year. Tesla sales in China nearly doubled this year.

The big profits for Ford Motor (NYSE:F) and General Motors (NYSE:GM) come from their pick-up trucks, which often sell for $50,000 and more, fully equipped. Tesla is announcing a pick-up in November. 

The Bear Case Switches to Survival

Tesla is failing in solar panels. Its batteries are doing well but still represent less than 7% of sales. 

Tesla is still not making a profit. It’s not yet close, with gross margins falling even as production increases.

Some analysts are publicly warning investors away from Tesla. The bears say the story is switching from innovation to survival, meaning it gets whacked with every earnings miss.

Then there’s CEO Musk himself, who, like a certain Washington resident, can’t seem to quit Twitter. Musk is mercurial, thin-skinned, more interested in his privately owned SpaceX than the car company. He wants to put chips in peoples’ brains. He is taking billions of dollars out of the company in pay and incentives while investors get speculation.

Of 33 analysts currently following TSLA stock, 10 are saying buy, 9 are saying sell, and 11 don’t know what to say. Their earnings estimates are all over the map, ranging from monster loss of more than $600 million to a small profit for this quarter. Guesses for next year range from a loss of almost $1 billion to a profit of $2.4 billion.

They don’t know what to think. Neither do I.

The Bottom Line on Tesla Stock

Tesla stock remains a gambler’s play, as fascinating as Elon Musk himself.

I can’t recommend it to investors, because I don’t gamble. But for traders looking for action, there may be no better play on the board, whether you want to bet up, down or short.

If I had a hunch what was going to happen at Tesla, I’d play it with options, where losses can be controlled and where leverage applies.

I’m going to sit this one out and grab some popcorn.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.

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