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3 Reasons TSLA Stock Sellers Might Regret Dumping ‘Insane Innovation’

Last Updated September 23, 2020 2:31 PM
Joseph Young
Last Updated September 23, 2020 2:31 PM
  • The Telsa battery day was successful analysts say, as the electric carmaker showed unprecedented confidence.
  • CEO Elon Musk said a $25,000 Tesla model is likely within three years as the company plans to develop batteries in-house.
  • New Street Research analyst Pierre Ferragu described the announcement as “insane innovation.”

The TSLA stock price plunged by 5.6% in a single session on September 22 . But sellers miss the big picture that involves more affordable vehicles and battery cost cuts in the long term.

The stock price fell an additional 5.53% in pre-market trading, as investors reacted to the lackluster Tesla battery day.

tsla stock
The year-to-date performance of TSLA stock. | Source: Yahoo Finance

Three factors would likely buoy the TSLA stock in the medium to long term. The catalysts are the likelihood of $25,000 Tesla models , the maturity of CEO Elon Musk, and positive guidance.

Tesla Plans to Cut Battery Cost by Half, Potentially Allowing $25,000 Models

Over the next three years, Tesla plans to develop batteries in-house , from processing raw materials to purchasing lithium deposits.

The grand strategy would allow the carmaker to cut the costs of batteries substantially. Eventually, Musk said that it would enable Tesla to introduce $25,000 models.

Musk said at the battery day:

“Our first car was an expensive sports car, then it was a slightly less expensive Sedan and finally, sort of a mass-market premium, the Model 3 and Model Y. But really, it was always our goal to try to make an affordable electric car. I think probably, about three years from now, we’re confident that we can make a very compelling $25,000 electric vehicle that’s also fully autonomous.”

Although the TSLA stock price sharply pulled back, many analysts were highly optimistic about the long-term strategy.

New Street Research analyst Pierre Ferragu described it as “insane innovation”  in an interview with the Financial Times.

The analyst emphasized that Tesla’s transparency about its technical plans showcases the company’s strong confidence. He said:

They’re demonstrating they’ve got a path to maintain their lead for the next decade.”

The TSLA stock price likely saw a sell-the-news pullback, given that investors anticipated the event for several months.

But with the bold plan Musk laid out, Tesla reaffirmed that it is miles ahead of its competition.

Tesla lays technical plans to improve battery technology. | Source: Tesla 

Strategists said before the battery day that Tesla is three to five years ahead of other electric carmakers.

As CCN.com reported, Tesla’s former chief engineer Peter Rawlinson said Tesla is doing something even traditional carmakers aren’t.

Tesla hosted the Annual Shareholder Meeting and Battery Day on September 22.

Musk Shows Maturity With a Reasonable Target

One of the potential catalysts behind the sharp drop of the TSLA stock price might be the high expectations.

Investors likely anticipated Musk to come up with a groundbreaking short-term strategy to boost Tesla in the near term.

But such a plan was unlikely to be introduced in the first place. Tesla is already in a highly advantageous position within the electric car market. Yet, it is continuing to outpace the competition by developing core technologies in-house.

The reasonable target of Tesla to manufacture $25,000 vehicles in three years demonstrated Musk’s maturity. While it might not fuel TSLA stock in the near term, the sentiment around TSLA remains positive over the long term.

Positive Guidance For TSLA Stock

According to Musk, Tesla expects vehicle deliveries to rise by 30% to 40% compared to last year.

CNBC estimates the new guidance implies deliveries of up to 514,500 cars by the end of 2020.  That exceeds the company’s initial guidance of 500,000 cars by the year’s end. Musk said:

“In 2019, we had 50% growth. And I think we’ll do really pretty well in 2020, probably somewhere between 30 to 40 percent growth, despite a lot of very difficult circumstances.”

As sellers and skeptics obsess over the short-term performance of TSLA stock, they are missing key points from the battery day.

Tesla now has an abundance of both short and medium-term catalysts, including higher guidance and a positive battery technology prospect.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the securities mentioned.