April 08, 2018

A rollercoaster ride for Tesla investors

All high-flying tech stocks are subject to sudden price swings, sometimes plunging in response to a hint of bad news, sometimes soaring in response to nothing at all. Tesla’s stock price is hyper-sensitive to news, and the news media loves running headlines about the company, so Tesla [NASDAQ: TSLA] shares are about as volatile as they come.

Above: Inside a Tesla while Autopilot is engaged (Instagram: themaverique)

However, the last couple of weeks were wild even by Tesla standards - over the course of a few days, the stock shed almost a fifth of its value, then recovered most of the loss even more quickly. It was a wonderful week for savvy day traders, yet another nightmare for short-sellers, and jolly good fun for the press.

The stock had been steadily sliding for a few weeks, driven by a growing consensus that the company wouldn’t reach its Model 3 production target of 2,500 units per week any time soon. Then a fatal Model X crash in California, during which Autopilot was engaged, tipped TSLA into freefall. From the low 300s, it dropped into the 250 range.

Above: A swig of "Teslaquila" may be necessary for those who tried to time their Tesla trades over the past few weeks (Instagram: elonmusk)

The press pounced. The expected flurry of Seeking Alpha posts crowed about the automaker’s imminent demise, and even mainstream media outlets were asking if Tesla “had a future.” Once the “Tesla’s in trouble” narrative took hold, pundits found all kinds of negative issues to add to the “spate of bad news.” Some were valid concerns (reports of Model 3 fit-and-finish issues), some were minor issues (a voluntary recall of pre-2016 Model S vehicles to fix a power steering component), and others were events that hadn’t seemed important a week earlier (Jaguar’s announcement of its I-Pace EV, turnover in the Tesla executive suite), but suddenly morphed into existential threats.

At the very peak of the schadenfreudefest, Elon Musk delivered a classic April Fools’ tweet, saying that Tesla was “bankwupt,” and that he himself had been “found passed out against a Tesla Model 3, surrounded by Teslaquilla bottles, the tracks of dried tears still visible on his cheeks.”

Above: A not-so-subtle April fools day message to those pesky Tesla short sellers (Twitter: elonmusk)

Obviously, Elon wasn’t dispirited by the newest negative nuggets, and the next day we found out why. Tesla’s production report for the first quarter of 2018 revealed that the company is now producing around 2,000 Model 3s per week - short of the overoptimistic predictions of the past, but more than enough to make the new sedan the best-selling plug-in vehicle in the US.

On this news, plus the assurance that the company won’t need a new capital raise this year (as many financial pundits had predicted) the stock stopped its slide. However, the rollercoaster ride wasn’t over yet - news that China plans to add EVs to the list of US products that will be slapped with new tariffs triggered another steep but short-lived sell-off before TSLA shot back up into the 300 range.

This particular wild ride seems to be over, but there is bound to be more volatility sooner or later - this is no stock for little old ladies.