Anybody who’s ever read The Prime Pick before knows that I am a staunch Tesla, Netflix, Apple, Adobe, and Google bull. Other than Tesla (ticker TSLA), the other five stocks are at all-time highs or very near to it.
Tesla has fallen. There is no getting around that. However, it has also rebounded impressively and has fluctuated about $88.00 in the last month. So with Tesla falling a day before it announces quarterly earnings, I’m sure there are plenty of people questioning the viability of a volatile stock like Tesla.
Let’s go over some facts first:
- Tesla fell from about $250 to $186 in the end of the year December – January transition.
- It rebounded from $186 to $200 before starting to wane back to $188. This is when I wanted to buy more Tesla (which would have effectively lowered my average about $25 from where I initially bought it), and it has gone up dramatically since then to $220 after a report from an analyst at Stifel Nicolaus raised Tesla’s stock value to $400.
- Tesla announces quarterly earnings TOMORROW, February 11, 2015. Before all quarterly earnings, Tesla has fallen quite bit (as have stocks like Netflix). Today is no exception to that. The problem is, Elon Musk already came out and told investors that sales of Tesla had decreased sharply in China and Asia. With sales in China expected to make up a good chunk of profits for Tesla, the slide began from $250.
What will most likely happen tomorrow:
- Tesla will continue to fall until after hours when their Q4 earnings are announced.
- Tesla should announce earnings that are close to or on track with what analysts expect from a healthy Tesla even after the decrease in Chinese car sales. This will restore Tesla to its previous price and should continue to increase its stock price.
- If Tesla announces poor earnings, then the stock will fall, but not far below the $180 mark we saw previously. Investors have shown that $180 is (give or take), the lowest Tesla should be valued at. If not for their brilliance in Electric Cars, then for their Lithium Ion Giga – Factory that is worth at a minimum of $17 billion – $10 billion less than its Market Cap.
Bottom Line: Tesla is a solid stock, and whether or not it announces dismal quarterly earnings tomorrow, it is still a good buy. It will not go below $180, and is backlogged with car orders until 2016 in the United States. It also has a year over year growth of more than 68%, and is expected to increase much more.