Things don’t look too good for Tesla Motors Inc. (NASDAQ: TSLA) as new 52-week lows are setting in below the $170 threshold. This comes on the heels of some embarrassing public relations gaffes for CEO Elon Musk, who actually cancelled a preorder by a popular tech blogger after the blogger had criticized the running of the Model X Launch Event back in September. The move underscores the sour mood ambient around the company lately, and paints Musk in a childish light just when he needs to look like he has things under control.
Unfortunately for Tesla, the stock rode high on nothing more than wishful thinking, catalyzed by some top-line growth that began in 2013, feeding hungry environmentalist dreams. Tesla’s attempts to stand out now are starting to look a little forced, as the up-down opening mechanism of the new Model X’s doors is being mocked as a gimmicky attempt to recreate the failed DMC DeLorean.
Tesla can rise again, but probably not before falling more first. The free equity ride institutional investors have given the company looks to be coming to at least a temporary halt. Market sentiment in general has shifted negatively, and significantly so, and in such times, investors tend to rediscover bottom lines and the importance of actually making money. While nobody is arguing that Tesla’s cars are bad — they are actually quite good and reliable — selling them profitably is another question entirely. Prices are not set by the cost of a product, but by supply and demand. If the meeting point between supply and demand does not exceed the costs of production, the product eventually will fail no matter how much hope it inspires.
There is not much that Tesla can do in the short term to reverse the decline in its stock. Bullish sentiment needs to return first to the markets in general in order for investors to get excited once again about a young development stage company with consistently negative earnings.
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