Electric vehicle maker Tesla (TSLA) is the leader in electric vehicle making. Just ask Joe Biden. Well, maybe not. At least, not according to a petition demanding Biden acknowledge Tesla’s leadership in the electric vehicle field. There’s little doubt that Tesla is currently the leader, but a growing body of competition suggests that that leadership may not be as cut-and-dried as it once was.
The recent volatility in Tesla share prices suggests that investors may be reconsidering as well. That’s part of why I’ve pulled back to neutral on Tesla; there’s a lot here to watch, and watching from an uncommitted perspective allows greater objectivity.
Tesla’s last year in share prices shows off that volatility. Tesla kicked off 2021 with a nice gain, from just under $730 to just over $880 in the space of a week. Tesla sputtered along the $880 mark for much of January. However, TSLA shares slipped to around $563 by the first week of March.
Shares recovered quickly, though, reaching over $760 by mid-April. By mid-May, however, the company had slumped back under $600 per share. By October, however, it cleared $800 per share and was making a serious play toward $900, which it passed that same month. Later that month, it cleared $1,000 per share.
The volatility of Tesla stock was on full display in the fourth quarter, as Tesla cleared $1,200 a share, retraced to under $900, nearly retraced back to $1,200, and then briefly fell under $800 by the end of January 2022.
The latest news is fraught with recalls. Tesla announced a recall of over 817,000 vehicles in a bid to fix a chime that rings to remind users to buckle their seatbelts. Two days ago, Tesla announced a recall for around 54,000 vehicles using Full Self-Driving’s beta edition that would disobey stop signs. It may not stop there, either. Federal officials are currently investigating reports of “phantom braking” in some Tesla models, and that’s just for starters.
Tesla’s Tech Troubles Seem to Be Getting Worse
Announcing two recalls in the course of three days isn’t exactly great news for any company. Most companies can go years between recalls, but Tesla has managed to stage two this close together. Granted, the Full Self-Driving recall seems to be fixable with an over-the-air software update, but the much larger recall about the seatbelt chime is a different matter. However, it seems like such a small thing to stage a recall about.
The problem isn’t so much the individual issues so much as what appears to be a growing body of them. One recent video that has since went viral displays a day with a Tesla Model Y on the streets of Boston. In one minute’s time, the self-driving car manages to swerve into the wrong lane, ignore a turning truck, and engage in some sharp cornering.
Recently, a teenager managed to hack a Tesla into unlocking its doors and blasting music. Last month, someone managed to figure out how to turn their Tesla into a Bitcoin miner.
All this comes in light of the fact that Tesla does not have a press department. No, seriously. That was disbanded in late 2020, and Elon Musk is on record as not planning to replace it since April 2021. With David Trainer currently calculating the value of a share of Tesla to be $138 and Tesla’s dividend history looking flatter than an uncharged battery, it’s easy to see where some would be bearish outright.
Wall Street’s Take
Turning to Wall Street, Tesla has a Moderate Buy consensus rating. That’s based on 17 Buys, seven Holds, and seven Sells assigned in the past three months. The average Tesla price target of $1,086.61 implies 19.4% upside potential.
Analyst price targets range from a low of $300 per share to a high of $1,580 per share.
Concluding Views
There is good and bad in Tesla in almost equal measure. It is, indeed, the leader in electric vehicles right now. However, a growing contingent of Chinese producers and legacy automakers looking to get in on the market suggests that may not be the case much longer.
Tesla’s hardware is showing increasing numbers of issues and increasing severity. Tesla’s media response is virtually nonexistent. These points are likely concerning, but investors seem to still be stepping in.
There’s entirely too much volatility in Tesla right now to suggest getting in. Yet there’s entirely too much potential in Tesla to suggest abandoning it. I’m staying neutral, therefore, until the whole thing shakes out one way or another. Right now, it could go either way at Tesla. There’s a clear case for either.
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