Tesla Gathers Momentum (TSLA)

Having long looked like a one-trick pony that would never live up to its promises, shares of Tesla NASDAQ: TSLA have been working overtime in recent months to prove the bears wrong. The stock burst onto the scene in 2013 after IPO’ing three years previously. However, despite a 600% rally over twelve months into 2014, it’s whipsawed around in the years since, leaving investors frustrated and the bears patting themselves on the back.

In the last three months though, the stock has looked like the Tesla of old and has ripped higher 60% to fresh all-time highs.

So what’s caused the renewed energy? It’s gone completely against the grain of the negative headlines that Wall Street had come to expect from CEO Elon Musk as well as those from fatal accidents involving their cars. Tesla’s shambolic launch of their cyberpunk pickup truck last month, whose unbreakable windows were broken on the exhibition stage in front of the world’s press, made them the laughing stock of the internet and seemed to sum up the bear’s case.

Shaking Off The Bears

The stock had grinded over 40% higher from June’s three-year lows after a stunning 50% collapse from all-time highs it had seen at the end of last year. But this latest push from October began with the company’s Q3 report at the end of that month. While revenue missed expectations and actually fell compared to the same period last year, a huge EPS beat more than made up for it and sent investors rushing in. Analysts had been expecting a loss per share of $1.37 but they were left flabbergasted when the company reported earnings per share of $0.80; comfortably in the black by more than $2.00.

This surprise beat surely delighted Musk who’s take special pleasure in publicly deriding the company’s bears who were sent scrambling to make sense of it. Indeed it looks as if some are starting to throw in the towel. Analysts from noted bear stalwart Credit Suisse were out on Monday this week admitting that “Tesla is leading in the areas that will likely define the future of carmaking”. These comments immediately sent the stock up 5% to the blue sky territory it’s currently on the verge of.

The Bear Case

The bear's case has and still does center around slower than expected adoption and constantly missed production targets. JMP Securities lowered its rating on the stock back in early October on concerns about falling demand. This came after the company reported lower than expected deliveries. All eyes will be on fresh production and delivery numbers due to the company in the coming weeks and their Q4 earnings towards the end of January.

It’s possible that Tesla remains very much a ‘someday’ stock as we suggested back in July but recent stock performance suggests momentum is gathering in all the right places. On top of this, the big names appear to be coming around to the idea that Tesla might finally be ready to walk the walk having talked a lot of talk. Earlier this month we reported on Morgan Stanley who was out with a $500 ‘bull case’ price target. To say they and others like Credit Suisse are cautiously optimistic is probably an overstatement but it doesn’t sound like they’re far off from it.

Looking Ahead

Despite a $70 billion market cap, this is a stock that knows how to run if momentum is with it and for investors looking to get involved, it feels like a case of no time like the present. That said, Tesla has always been extremely vulnerable to production and delivery reports not to say quarterly earnings so due respect must be paid to these and the fact that they can appear at any time. But that’s part of the fun when you get involved with a company that doing something that’s never been done before.