- Tesla shares spiked 6% on Monday, seemingly for no reason.
- There was no news, but it’s possible that sellers overdid it after some bad delivery numbers for the Model 3.
- It’s also possible that the markets are clueless on the Tesla front.
On Monday, as markets were wrapping up trading, Tesla surged over 6% to close at $US336.
The move was baffling. I initially thought that there might some news coming after the bell. But nothing arrived.
Last week, Tesla reported pretty weak delivery numbers for its all-important Model 3 – just 1,550 in the fourth quarter, versus an earlier goal of many thousands. The stock took a hit, but then stabilised.
And so the stage was set for Monday’s action. Here are three reasons why Tesla bounced back:
1. The crummy Model 3 numbers are in the rearview mirror.
Markets have had the chance to deal with the poor Model 3 performance, which to be honest was probably somewhat priced into the stock prior to last week. So sure, the numbers were unimpressive, but investors may have overreacted. Counterbalancing the bad Model 3 totals was the fact that Tesla delivered more than 100,000 vehicles in 2017 – a record. That revenue will show up when Tesla reports its full-year and fourth quarter results.
2. Longs wanted to scoop up more shares at a discount.
Classic buy the dip. After all, Tesla was pushing $US400 in 2017, before it fell back. If the downtrend was overcooked, then anybody who wanted to expand their Tesla position was presented with a golden opportunity. There was precedent, by the way. Tesla swooned last year after its announced its merger with SolarCity. Some investors thought the negative reaction was overdone and were able to ride the recovery and and subsequent surge.
3. The markets are clueless.
Tesla is 14 years old, has almost never posted a profit, is saddled with debt, doesn’t have enough cash to make it to 2019, and apparently can’t successfully build a mid-size sedan for which it has something like 400,000 pre-orders. Investing in this company is suicidal, according to sceptics. Investors jumping in now are either hardcore pros who have specific objectives – or dumb money that’s missed out on the huge initial gain that Tesla has served up since its 2010 initial public offering. Also, investors are trading Tesla like a rapid-growth tech company, not a carmaker governed by the stodgy dynamics of the auto industry.
Pre-market on Tuesday, Tesla was down slightly, to $US335.
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