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Tesla Stock Dumps Because the Market Is Calling Elon Musk’s Bluff

Last Updated September 23, 2020 12:47 PM
Harsh Chauhan
Last Updated September 23, 2020 12:47 PM

By CCN.com: Tesla has given investors a torrid time on the stock market so far this year. Shares of the Elon Musk-led company have crashed close to 37% so far in 2019 even though the billionaire CEO has been trying hard to pump the stock through his wild claims.

Somehow, Tesla stock started picking up some momentum heading into the company’s annual shareholder meeting. Elon Musk made another valiant attempt to boost the stock pricing with a blockbuster prediction.

Elon Musk’s Latest Effort to Pump Tesla Stock Falls Flat

Tesla stock should have taken off after Elon Musk’s statement at the shareholder meeting. He said:

“We have a decent shot at a record quarter at every level…and 90% of orders coming from…new customers.”

The Tesla CEO also added that the electric vehicle maker isn’t facing a “demand problem,” claiming that sales of the company’s cars have “exceeded production.” If that’s indeed the case, Tesla could deliver a massive quarter when it releases its second-quarter results.

tesla stock price
Tesla stock fell despite Elon Musk claiming that the company has a shot at a “record quarter.” | Source: Yahoo! Finance

But the market doesn’t seem to be buying Musk’s promises. Tesla stock dipped over 3.6% on June 13 in the aftermath of the shareholders’ meeting, indicating that investors are not confident the company will be able to meet the CEO’s claims.

What’s Scaring TSLA Investors?

Tesla reportedly sold  13,950 Model 3s in May, according to InsideEVs. This was a significant jump over the 10,050 units it moved in the prior month.

In all, Tesla has sold just over 46,000 Model 3s in the first five months of 2019. But it was in a much better position toward the end of 2018 when it sold 101,700 Model 3s in the last five months. InsideEVs has been tracking EV sales in the US for almost a decade now with a fairly decent track record.

So it is evident that sales of the company’s entry-level model have fallen off a cliff this year. This is bad news for the company because the Model 3 accounted for 80% of the company’s deliveries and production in the first quarter, when the company missed the market’s estimates by a wide margin.

tesla tweet
  Source: Twitter

So if Tesla indeed sold just 24,000 Model 3s in April and May combined, it needs a massive bump in both production and deliveries this month to fulfill Elon Musk’s claims.

This is probably the reason why Cowen analyst Jeffrey Osborne believes that the CEO’s claims don’t add up. He says :

“Other than highlighting profitability in second half of 2018 which benefited from a great deal of pent up high price Model 3 demand and regulatory credit sales, there was no discussion of ongoing profit trends or an update of financial guidance for the quarter or the year.”

“Musk claims that sales have far exceeded production, but the data doesn’t suggest that.”

Elon Musk Has a History of Not Delivering

tesla CEO elon musk
Cowen analyst Jeffrey Osborne said that the data doesn’t seem to support Elon Musk’s claim that sales have far exceeded production. | Source: REUTERS/Aly Song

Apart from the data on Model 3 sales, Elon Musk’s failure to live up to his words on more than one occasion seems to be another reason why investors aren’t pricing record production into Tesla’s stock price.

For instance, the company was supposed to have a fully self-driving car on the roads back in 2017. That didn’t materialize. Moreover, Musk’s SpaceX program is already running two years late.

Given that the Tesla CEO has a habit of shooting from the mouth and a history of making absurd forecasts, it isn’t surprising to see investors shunning the stock despite his effort to drum up some positivity.

It looks like the market is calling his bluff.