Tesla Motors Inc (NASDAQ:TSLA) will announce its earnings report for the first three months of 2013 next Monday, and the market seems to be getting behind the company in a big way. Since the start of the year shares are up more than 65 percent, and the company has yet to show its first profit.
Earlier in April, Tesla Motors Inc (NASDAQ:TSLA) gave guidance that it expected to report a profit for the first time on Monday, May 6. It’s likely that the company will do so, but that puts it under tremendous pressure heading into Q2.
It’s common knowledge that more than 44 percent of Tesla Motors Inc (NASDAQ:TSLA) stock is sold short. The company has a large amount of detractors, and there may be a short squeeze coming in the second quarter, but the downside risks for the electric car manufacturer, and the upside for the first quarter of 2013 was a great period for car sales, not just for Tesla Motors Inc (NASDAQ:TSLA) sales. The company is vulnerable to the vagaries of that market, and with a large number of analysts predicting a new macro economic shock from Europe, Japan, or China in the near future, that market may not be performing well in a couple of months time, and Q2 could be rocky if indicators point to such an occurrence.
Tesla Motors Inc (NASDAQ:TSLA) has cultivated an incredible brand in recent years, and that brand has become particularly powerful in 2013, taking off from “geek culture” and making its way into more mainstream conversation. One mistake could destroy that capital however, as Toyota found out just a few years ago.
There are a substantial number of people who stand to gain from a loss of faith in Tesla, including people shorting the company and people with more indirect goals, for example undermining the Department of Energy Loans program. If Tesla Motors Inc (NASDAQ:TSLA) makes a single mistake it will be publicized immensely and Tesla might lose out.
There are other problems with Tesla Motors Inc (NASDAQ:TSLA), but the three above constitute the major downside risks for the company. Tesla Motors Inc (NASDAQ:TSLA) has no control over the global economy, and once it truly enters mass production its control over faults will be far less effective. Investors should be aware of the exogenous risks to the firm’s stock price before they jump on the bandwagon and invest.