Two and a half months ago, I wrote in this space that I thought Tesla Motors (TSLA) was due for a major comeback in 2017 after a down 2016. So far, it’s way ahead of schedule. TSLA stock is already up 22% year to date!
What sparked the big run-up?
Not earnings. The company missed fourth-quarter estimates by 60% in late February, knocking the stock back from 277 to 246. Those results were disappointing considering the company was coming off its first-ever profitable quarter in Q3. Fourth-quarter EPS were in the red again at -$0.74. The good news is that sales remained quite strong, growing 88% year over year. That’s impressive considering that the company’s greatest near-term driver of sales growth, and thus the biggest prospective catalyst for TSLA stock, is yet to come …
Model 3: The Next TSLA Stock Catalyst
That would be the Model 3, Tesla’s first “affordable” electric car. And while the car has yet to hit the market, nearly 400,000 people have already pre-ordered the car, and plopped down the $1,000 deposit required to do so. That bodes well for future sales of the car. Here’s what I wrote about the Model 3 release in December:
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“To put the Model 3 reservation numbers in perspective, no car in the world sold as many units in all of 2015! It was also more than the full-year 2015 sales totals for the BMW 3 Series, Mercedes-Benz C-Class, Acura TLX and Lexus IS combined. Those cars, by the way, are essentially a who’s who of small luxury sedans that are likely to represent the Model 3’s stiffest competition.
“Granted, not everyone who slapped down the $1,000 for a Model 3 will end up buying the car, but most will. When you consider that the most Model Ss Tesla has sold in a year were the 50,508 it sold in 2015 (this year’s numbers aren’t out yet) … well, that shows you the potential of the Model 3.
“In essence, the Model 3 introduces Tesla to a whole new audience, allowing every “Average Joe” to buy their first electric car. Or at least that’s the perception. And on Wall Street, perception is everything.”
Well, Wall Street’s perception of the Model 3 seems to be quite favorable. What really helped drive Tesla stock early last month was a comment from a Tesla spokesperson saying the company was shutting down production at its California assembly plant for a week in February to focus on production of the Model 3. Translation: the company seems dead set on meeting its July 2017 target to begin building the new cars. And that means the car is indeed likely to debut this fall, as expected.
The Model 3 comments prompted one analyst (Baird’s Ben Kallo) to forecast that Tesla could deliver as many as 25,000 Model 3s by year’s end—roughly half of its highest annual Model S delivery total—in the course of just a few months!
We’ll see if Tesla can meet Baird’s optimistic Model 3 delivery target. But it’s already clear that the buzz is back for Tesla Motors. Things should get even buzzier as the Model 3 inches closer to production. Now that TSLA stock has withstood a hit from an underwhelming fourth quarter, it seems to be shaking off the cobwebs, breaking above its 50-day moving average this week.
Good Entry Point for Tesla Stock
Bottom line: the bounce-back in TSLA stock I forecast for this year is way ahead of schedule, with no major catalysts yet other than a good chart and a few quotes confirming a production date. If investor fervor for the stock can be conjured up out of so little, I think it should only heighten in the coming months.
With that in mind, I say buy TSLA stock now while it’s still trading in the middle of its two-month range. At 262 as of this writing, TSLA is well shy of its January highs, with its biggest potential catalysts still on the horizon.
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