jesselivenomore
Member
Share price has gone absolutely nowhere in the last 22 months, oscillating between 180 during bearish sentiment and 280 during bullish sentiment. So for TSLA to reach 300 or high 200s at some point in 2016 would not signal a "great" year, but rather simply maintaining the status quo of going nowhere.
That may turn out to be the case, but I don't see it. There are too many catalysts coming up that will cause TSLA to break one way or the other, up or down.(I'm betting up)
First you want to examine why share price has remained stagnant for almost 2 years now, significantly lagging other high beta names and the Nasdaq as a whole. There are 2 reasons.
1. Model X delay. It is no coincidence that the 2 year delay in Model X launch just so happens to put a lid on stock price for the same time period. A delay in Model X means an accumulation of costs relating to developing and launching the X, which means cash burn, which means a delay in profitability and a balance sheet that doesn't look too hot. Much of this is the crux of the short thesis. And while we all knew that the X was coming eventually, share price cannot appreciate while the risks seemed to pile up in the here and now.
2. TSLA was overvalued. Elon said it himself. While there may have been plenty of true buyers at $30, $40, even $50 or $60, the path from $70 to $200+ was pure short covering. In fact, it was a short carousel of covering, which drives the price up, then new shorts piling on because it was overvalued, then forced to cover at even higher prices because the old shorts couldn't take it anymore. It was shorts covering into shorts. While for longs that circus ride might have been enjoyable, the forced buying did make TSLA overvalued. Just like forced selling from a hedge fund blowing up would create undervalue in an equity, the forced buying from the shorts blowing up created overvalue.
Now two things can happen once something gets overvalued. It can crash back down to earth, or it can pause, consolidate, and wait for the fundamentals to catch up. While the shorts currently in TSLA all seem to be focused on the former, the latter is exactly what is happening today. Not only has the last 2 years allowed fundamentals to catch up, brilliantly, Elon has used the short squeeze and overvaluation to raise tons of capital at minimal dilution, and turned that capital into assets that will create future value. It is the height of irony that the over-valuation of TSLA that is the reason why so many shorts got into TSLA was caused by shorts to begin with, and those same shorts covering and driving the price so high is what will fund Tesla's future expansion in order to grow into its valuation. That is damn near a greek tragedy if I wasn't actually long.
So we have established why TSLA has gone nowhere. Now, looking at the development of those same two factors, it is why I believe we will go SOMEwhere in 2016. The model X that has been so delayed is finally coming online, and development costs for it should go down dramatically now that it is finished. That means a reduction of cash burn, the balance sheet turning around, and near term risks abating. The overvaluation has had time to consolidate and work itself out. Remember, when TSLA was first rocketing up in share price there was no Supercharger network, no Gigafactory, no Tesla energy, no Autopilot. Heck, there wasn't even dual wheel drive. Those concepts did not even exist yet. Longs may be frustrated thinking why hasn't TSLA gone anywhere in the meantime while all those things have added value. In reality, those are the things that kept the share price up and allowed TSLA to grow into its valuation without a more significant pullback after the initial overvaluation. Again, while I agree with some shorts that INITIALLY from 100 to 200+ TSLA was overvalued caused by forced buying, after the past 22 months of consolidation, it no longer is. In fact, to call TSLA overvalued today is a gross misunderstanding by the bears of how the stock market operates. Overvalued and undervalued assets do not last for 2 years at the same price point. The markets are too smart for that. The market is only irrational and can misprice things in the short run, either from exuberance/depression of sentiment, or from forced liquidation. But that lasts days to weeks. Not years. So for bears to call TSLA overvalued today is a juvenile outlook of the market mechanism. After 22 months of 200+ share price, it is not overvaluation, it is price discovery.
With that said, with TSLA catching up to its own valuation, and with the Model X coming online, I expect 2016 to be the next leg up for TSLA. So after all that my point is this, if the next leg up truly is coming, do you really think we will stop at $300?
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