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Tesla’s Stock is More Fun to Watch Than a NASCAR Race

Elon Musk is prone to making outlandish predictions: Humans will colonize Mars by 2025; maglev trains will travel between DC and New York in 29 minutes; artificial intelligence will one day rule the world. He’s never been shy about putting himself out there. So it’s no surprise that he would boldly predict Tesla would sell 100,000 of the company’s first mass-market vehicle, the $35,000 Model 3, this year. And 500,000 by the end of next. Hyping expectations is what he does. The only problem is that by running his mouth, Musk may have cost Tesla billions of dollars.

See, over the last year, Tesla’s wildly overvalued stock has climbed faster than a SpaceX rocket. By the end of June, it had more than doubled to a record high of $383 per share ⏤ it sat at $181 last December. For three consecutive months, the company has also reigned as the most valuable automaker in the country, with a market capitalization greater than $60 billion, despite producing only around 85,000 cars a year (compared to GM’s 9 million) and never having turned a profit. Seriously, the company has lost money every quarter since its IPO in 2010.

TSLA Stock

Google Finance

It was news earlier this month of production issues with the Model 3, however, that finally sent the rocket spiraling downward. Even though the first Model 3s rolled off the production lines as scheduled ⏤ and are set to be delivered this week ⏤ Tesla is woefully behind schedule. As in, the company only expects to produce a paltry 100 cars in August, despite promising to deliver 100,000 of its over 400,000 pre-orders by December. To exacerbate the problems, Tesla’s new $5 billion battery plant in Nevada is struggling to keep up.

Those numbers ⏤ no doubt viewed through the lens of Musk’s prediction and the company’s ambitious growth strategy ⏤ have sent investors scurrying and the stock plummeting. Knocked from its No. 1 perch, Tesla’s stock fell as low $309 on July 6 before beginning a modest ascent over the past few weeks. As of today, it sits around $343 per share (with a $56 billion market cap), and nobody really knows where the roller coaster goes from here ⏤ it’s been reported that Tesla is one of the most shorted stocks on the market.

Look, people love Elon Musk, or they love to hate him. He evokes strong feelings in humans. Personally, I’m ambivalent about Musk the man ⏤ although I do appreciate that he tells a lot of dad jokes. I have to admit, though, that watching the Tesla stock bounce around like a kid in a moon house is more fun than watching an actual car race. And I’m strangely rooting against him. Not because I oppose electric cars (quite the contrary) or am shorting the stock, but because I dislike watching overvalued tech companies (and that’s really what Tesla is) reap vast rewards without demonstrating things like revenue or profits or necessary business fundamentals. I hate watching investors pour money into companies based on potential revenues but few concrete results.

Elon Musk in China

That said, there’s enough evidence to suggest the stock could go either way. Which means the race continues. On one hand, the company has plenty of orders, is exploring a new plant in China to help keep up with production, and has plans to move not only into battery powered pickups, vans, and semis, but also a mass-market crossover in the next few years. Assuming they can remedy the current scale issues, the potential for a continued meteoric rise remains high.

On the other, car sales have slowed this year, including for Tesla’s two other vehicles, the Model S and Model X. Competition in the electric car market is growing quickly, as most automakers have plans to add all electric or hybrid options in the next year or so. And finally, Tesla will reportedly only have $1.1 billion cash on hand by end of the year, not nearly enough to fulfill all of its Model 3 orders. They’re going to need to raise more money.

If the stock’s latest upward trajectory is any indication, things may be back on track. If the company’s still only delivering 100 Model 3s a month by the fall, however, and it’s anybody’s guess where things go. Down no doubt. The only real prediction you can safely make at this point is one that Musk probably won’t: watching Tesla’s stock over the next few months is going to be a hell of a ride. And I’m staying glued to the action.