A hunger for this luxury car maker’s shares has taken a hit recently, but just-reported production news is re-whetting the appetite of investors.
Tesla Motors (TSLA)
from Ian Wyatt’s Million Dollar Portfolio
Shares of Tesla Motors (TSLA) have taken a beating recently, falling 19% in the last 30 days.
It’s been a big disappointment, especially following CEO Elon Musk’s unveiling of the Tesla Model X. The $130,000 SUV looks to have some amazing safety features, which will be especially appealing to families.
Initially, Tesla stock started falling because there were concerns about the price of the Model X. At a 30% premium to the Model S sedan, investors are concerned that the premium price may turn off would-be buyers.
More recently, Consumer Reports issued a negative report on the Model S.
The report was titled “Tesla Reliability Doesn’t Match Its High Performance.” Here are some highlights from the report.
Tesla Motors’ all-electric Model S sedan got high marks in Consumer Reports’ 50-plus tests involving driving dynamics and livability, and it consumed energy at the electric equivalent of 84 miles per gallon (87 MPGe in the P85D trim). It’s the best-performing car we’ve ever tested.
But its predicted reliability is another matter.
As part of our Annual Auto Reliability Survey, we received about 1,400 survey responses from Model S owners who chronicled an array of detailed and complicated maladies. From that data we forecast that owning that Tesla (model) is likely to involve a worse-than-average overall problem rate. That’s a step down from last year’s “average” prediction for the Model S. It also means the Model S does not receive Consumer Reports’ recommended designation.
The main problem areas involved the drivetrain, power equipment, charging equipment, giant iPad-like center console, and body and sunroof squeaks, rattles, and leaks.
If that bad news wasn’t enough, there’s more.
Tesla just released a software update for the Model S. The biggest feature is “autopilot,” which allows the car to drive “hands free.” This feature allows the Model S to drive down the highway, change lanes and exit without the assistance of a driver.
Sounds pretty cool. But unfortunately, drivers are reporting some initial problems. These problems include cars exiting from the highway, even when the driver isn’t giving that instruction.
Tesla says that the software is very new, and the company is working out the issues. In the meantime, CEO Elon Musk reminds drivers to keep their hands on the wheel.
The drop in Tesla shows the risk with high-growth, richly valued companies. Any slight problem can lead to a quick and substantial decline in the stock price.
In the Million Dollar Portfolio, we’ve been “long” Tesla for several years. We’re currently up a healthy 455% --even after the recent pullback.
I think it’s best to hold on tight and let the dust settle. Frankly, I think the Model X will be a huge success for Tesla. And the company’s autopilot feature will be improved as Tesla collects data and makes adjustments.
Tesla continues to push the envelope on electric and self-driving cars. This remains a huge growth opportunity for long-term investors.
Ian Wyatt, Ian Wyatt’s Million Dollar Portfolio, www.100kportfolio.com, 802-434-6900, October 21, 2015
Wall Street’s Best Investment’s Editor’s Note: Tesla Motors announced earnings Tuesday evening, reporting a loss of $1.78 per share, but higher revenues—$937 million, up from $851 million in the prior year. Investors are sending the shares higher as I write this, because the company announced that it had a record quarter for production and delivery, producing 13,091 and delivering 11,603 vehicles in the quarter—higher than forecast.