After a long period during which Tesla Motors Inc (NASDAQ:TSLA) enjoyed incredible market sentiment, the electric car manufacturer’s share price has pulled back significantly in the last few days. Overall, the value of the company has tailed off by around 15% in the last month, as the city responds to assertions that Tesla’s stock was overpriced.
The question on every investor’s mind at this point in time is…does this cooling off period in Tesla Motors Inc (NASDAQ:TSLA)’s meteoric rise signal a good buying opportunity? Or are the bears and short sellers right, and has Tesla been overpriced for quite some time?
The Bedford Park Opportunities Fund returned 13.5% net of all fees and expenses in the second quarter of 2021, bringing its year-to-date return to 27.6%. Q2 2021 hedge fund letters, conferences and more In the fund's second-quarter investor letter, which ValueWalk has been able to review, Jordan Zinberg, the President and CEO of Bedford Read More
Direct sales issue
In order to answer this question, it’s first sensible to look at the factors behind the recent decline in Tesla sentiment. There are too many aspects to this. The first is that many investors and market analysts have been focused on Tesla’s performance in terms of direct sales. Tesla operates without dealers, and this has drawn criticism in some quarters, and could have at the very least contributed to its recent share price slump.
But a more significant factor is the aforementioned short selling. Tesla Motors Inc (NASDAQ:TSLA) has long since been targeted by short sellers, and it seems quite clear that this sentiment is having a stronger influence on Tesla in the short-term than in-house factors. Short interest in Tesla currently amounts to over 31 million shares, which is approximately 37 percent of the 84.5 million Tesla shares that are traded unrestricted on the open market. Thus, the bears have been driving Tesla sentiment in recent weeks.
Going forward, the future for Tesla Motors Inc (NASDAQ:TSLA)’s share price would seem to be more obviously dependent on this market sentiment than holistic factors related to its business. Many investors and analysts have in actual fact been bullish about the future of Tesla, it is just that they have been outnumbered over the last couple of months after an extensive period of trading success for Tesla.
Tesla’s new stores in Ohio
This recent period of negative trading could just be a relatively short blip, though. Tesla has recently reached a deal with the Ohio Automobile Dealers Association which will enable the company to operate three new stores in the state. This move could lead to improved sales figures for Tesla, which would naturally help drive sentiment positively in the future.
Despite the negative trading environment for Tesla Motors Inc (NASDAQ:TSLA), it is important to emphasize that their recent sales figures have in fact been excellent. Tesla Motors Inc (NASDAQ:TSLA)’s Q4 sales exceeded expectations, and the company has already announced plans to considerably increase production during the current calendar year, with a total of 35,000 vehicles forecast for delivery in 2014. Tesla has also experienced sale prices 10% higher than it anticipated during 2014; another huge boon for the company.
Undoubtedly there will be more obstacles for Tesla Motors Inc (NASDAQ:TSLA) to hurdle in the near future, particularly given that they’re part of the super-competitive motor trade. Already other major players in vehicle manufacturing such as Audi are planning electric vehicles to rival Tesla. But although it has been a difficult period for Tesla, their underlying fundamentals still look pretty good for the future, with Tesla Motors Inc (NASDAQ:TSLA)’s long-term plans for East Asia offering excellent potential for growth.