The Wrong Reason To Sell Tesla
Great Ones, by now I’m sure you’re all aware of my mixed feelings about Tesla (Nasdaq: TSLA).
I’m all for green energy, electric vehicles (EVs), improving battery technology and all that jazz. At one point, I was even planning on making a Tesla my next car purchase. Those Model 3s look pretty sharp, if I do say so myself.
But investing in a company’s stock and liking or buying a company’s products are two completely different things. My reasons for not liking TSLA stock are completely different from why I changed my mind about buying a Tesla EV.
Personally, I have issues with supporting Tesla CEO Elon Musk … but that’s just me.
There’s also how expensive Teslas are compared to competing EVs … and the fact that Tesla appears to be going down the Apple-style walled-garden path with its products.
I’m really not a fan of locking customers into overpriced ecosystems. But again, those are personal purchasing preferences, not investing preferences.
There are many reasons to be wary of investing in TSLA stock, but the current slate of financial media headlines isn’t one of them.
The best example out there right now is this headline from Investor’s Business Daily: “Tesla Deliveries Hit A Record But Miss Views Amid Demand Concerns.”
Wait … demand concerns for Tesla?
Apparently, according to Wedbush analyst Daniel Ives. In a Monday note to clients, Ives warned that Tesla was “clearly” experiencing delivery challenges and demand issues.
Now, delivery challenges I’ll give you. Tesla has been going all out on production to catch up with EV demand, opening up and expanding production facilities from Texas to Germany to Shanghai.
As a result, the company delivered a record 343,830 EVs in Q3, up a whopping 42% from last year.
By comparison, Tesla produced 365,923 EVs in September alone.
That’s one heck of a disparity between production and deliveries, and it underscores the real issue Tesla has right now: getting completed vehicles into the hand of customers.
Many of these completed Tesla EVs are coming out of the company’s Shanghai factory, and we all know how shipping from China has gone this year.
Every time you hear “supply chain issues,” that typically means: “We had trouble shipping stuff from China.” Clearly, even Tesla isn’t immune to this shipping crunch.
Tesla Demand Concerns?
So, logistics problems and delivery issues… Yeah, Tesla has those in spades. But demand concerns?
If Wedbush’s Ives is talking about Chinese demand, that’s a no-brainer. Chinese consumers were always going to favor domestic companies over Tesla. It’s just in the culture. It’s part of doing business in China, and I’ve talked about this pitfall of Tesla’s for a very, very long time.
But outside of China, there are no demand concerns … yet. And Ives should already know this before his bearish TSLA stock report helped send the shares down nearly 8% today.
Tesla has an EV order backlog pretty much everywhere else but China. Now, that might not sound like much to anyone following the automotive industry.
For companies like Ford, GM, Toyota … practically every other automaker, order backlogs don’t mean much at all. Those orders are coming from auto dealers who then sell vehicles to the customer.
But Tesla doesn’t operate this way. Tesla is the only automaker that sells EVs directly to the customer. So when Tesla says it has an order backlog, that isn’t because it can’t meet dealer demand, it’s because it can’t meet customer demand.
There’s a rather large difference there: Direct-to-customer sales have already been sold to a customer — duh! — while dealer sales have not.
In other words, Tesla most definitely does not have a demand problem right now.
Will it have one down the road due to soaring inflation, rising borrowing rates and Elon Musk’s antics turning away the company’s core consumer demographic?
Probably at some point.
But that point is not now. Not when Tesla has a growing backlog of orders in every market except China. And if y’all were buying TSLA stock because of its Chinese growth prospects … you’ve already failed.
The bottom line here is that there are many reasons — both personal and investing related — to not buy a Tesla EV or TSLA stock. But Tesla EV demand isn’t one of them at this point.
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And with that, Great Ones, we’re calling it a day.
Awww … but I wanted more!
Call it fate. Call it luck. Call it karma. Call it “We forgot to feed the hamster last night.” Or call it “Joe got a little too jiggy with it at the Ohio Renaissance Fair yesterday.”
Say no more… Jeez, Joe!
Well, you can let me know all about your profound disappointment by emailing us at GreatStuffToday@BanyanHill.com.
And while you’re there, let us know what you’re watching in the market right now.
Are you hunkering down and preparing for the worst?
Are you buying bonds and dividend stocks?
Or are you buying tech hand-over-fist right now in bargain-hunting mode?
Inquiring minds want to know!
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Regards,
