Tesla (NASDAQ: TSLA) may have produced 11,500 vehicles in the four quarter. If this is true, the strong number has positive ramifications, which is something the company needs. This past month, Tesla stock failed to break above its 50- and 200-day moving average. For the most part, the CEO’s erratic behavior on Twitter (NYSE: TWTR) is hurting the stock.
CEO Elon Musk’s Tweet of securing funding when he did not have it, in taking the company private, proved irresponsible and ultimately hurting the stock. Now that this news is in the past, investors may assess the 11,500 QTD production estimate. If production of the Model S, X, and 3 is below its earlier target, then demand is far weaker than markets realize.
Model 3’s pricing, with the $7,500 rebate, is still too expensive to spur demand. The company is also likely selling each unit at a loss. So the scenario where Tesla’s production expansion will lead proportionately to higher sales is not guaranteed.
Valuation
Tesla stock still trades at high forward P/E multiples near 90 times. By comparison, General Motors (NYSE: GM), whose shares are in freefall, trade at a 5.5 times forward P/E. The company also pays a dividend close to 5%.
Tesla’s stock could sustain high valuations but demand must hold or increase indefinitely. Otherwise, the stock risks falling further.
